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<TITLE>FORM S-1</TITLE>
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 <B>As filed with the Securities and Exchange Commission on
August&nbsp;9, 2005</B>
</DIV>

<DIV align="right" style="font-size: 10pt;">
<B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
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<B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

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<B>Washington,&nbsp;D.C. 20549</B>
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<B>Form S-1</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>UNDER</B>
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<DIV align="center" style="font-size: 12pt;">
<B>THE SECURITIES ACT OF 1933</B>
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<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of registrant as specified in its charter)</I>
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    <TD align="center" valign="top">
    <B><FONT face="helvetica,arial">Delaware</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B><FONT face="helvetica,arial">8050</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B><FONT face="helvetica,arial">20-3068069</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT face="helvetica,arial">(State or Other Jurisdiction
    of<BR>
    Incorporation or Organization)</FONT></I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I><FONT face="helvetica,arial">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I><FONT face="helvetica,arial">(I.R.S. Employer<BR>
    Identification No.)</FONT></I></TD>
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<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>330 North Wabash</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Suite&nbsp;1400</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Chicago, Illinois 60611</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(312)&nbsp;977-3700</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address, Including Zip Code, and Telephone Number,</I>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>Including Area Code, of Registrant&#146;s Principal Executive
Offices)</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Deborah C. Paskin,&nbsp;Esq.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Executive Vice President, Secretary and General Counsel</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Brookdale Senior Living Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>330 North Wabash</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Suite&nbsp;1400</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Chicago, Illinois 60611</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(312)&nbsp;977-3700</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Name, Address, Including Zip Code, and Telephone</I>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>Number, Including Area Code, of Agent For Service)</I>
</DIV>

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<B><I>Copies to:</I></B>
</DIV>
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    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
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    <TD align="center" valign="top">
    <B><FONT face="helvetica,arial">Joseph A. Coco,&nbsp;Esq.<BR>
    Skadden, Arps, Slate, Meagher&nbsp;&#38; Flom LLP<BR>
    Four Times Square<BR>
    New York, New York 10036-6522<BR>
    (212)&nbsp;735-3000</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B><FONT face="helvetica,arial">Steven A. Seidman,&nbsp;Esq.<BR>
    Willkie Farr&nbsp;&#38; Gallagher LLP<BR>
    787 Seventh Avenue<BR>
    New York, New York 10019-6099<BR>
    (212) 728-8000</FONT></B></TD>
</TR>

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<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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<B>Approximate date of commencement of proposed sale to the
public:</B> As soon as practicable after the effective date of
this registration statement.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If this form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of earlier effective registration statement for
the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

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If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
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    <TD width="2%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
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    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Proposed Maximum</FONT></B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Amount of</FONT></B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Title of Each Class of</FONT></B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Aggregate</FONT></B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Registration</FONT></B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Securities to be Registered</FONT></B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Offering Price(1)(2)</FONT></B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Fee(1)</FONT></B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Common Stock, par value
    $0.01&nbsp;per share
    </FONT></DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <FONT face="helvetica,arial">$200,000,000
    </FONT></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <FONT face="helvetica,arial">$23,540
    </FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Estimated solely for purposes of calculating the registration
    fee in accordance with Rule&nbsp;457(o) under the Securities Act
    of 1933, as amended.</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes offering price of shares that the underwriters have the
    option to purchase to cover over-allotments, if any.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<FONT color="#E8112D">The information in this preliminary
prospectus is not complete and may be changed. These securities
may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell nor does it seek
an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted.
</FONT> <BR>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<FONT color="#E8112D">Subject to completion. Dated
August&nbsp;9, 2005.
</FONT>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10687y1068701.gif" alt="(BROOKDALE SENIOR LIVING LOGO)">
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Brookdale Senior Living Inc.</B>
</DIV>

<DIV align="center" style="font-size: 14pt;">
Common Stock
</DIV>

<DIV align="center" style="font-size: 4pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This is an initial public offering of shares of common stock of
Brookdale Senior Living Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Brookdale Senior Living Inc. is
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the shares to be sold in the offering. The selling stockholders
identified in this prospectus are offering an additional
4,172,000&nbsp;shares. Brookdale Senior Living Inc. will not
receive any of the proceeds from the sale of the shares being
sold by the selling stockholders. After this offering, new
investors will own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the
Company&#146;s common stock and Fortress Investment Holdings LLC
will own over 60% of the Company&#146;s common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for the
common stock. It is currently estimated that the public offering
price per share will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
Brookdale Senior Living Inc. intends to list the common stock on
the New York Stock Exchange under the symbol &#147;BKD.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>See &#147;Risk Factors&#148; on page&nbsp;12 to read about
factors you should consider before buying shares of the common
stock.</I>
</DIV>

<DIV align="center" style="font-size: 4pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.</B>
</DIV>

<DIV align="center" style="font-size: 4pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 37%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="helvetica,arial">Per Share</FONT></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="helvetica,arial">Total</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Initial public offering price
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Underwriting discount
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds, before expenses, to
    Brookdale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds, before expenses, to the
    selling stockholders
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To the extent that the underwriters sell more
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, the underwriters have the option to purchase up
to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
from Brookdale at the initial public offering price less the
underwriting discount.
</DIV>

<DIV align="center" style="font-size: 4pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters expect to deliver the shares against payment in
New York, New York
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 16pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B>Goldman, Sachs&nbsp;&#38; Co.</B></TD>
    <TD align="right"><B>Lehman Brothers</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 4pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prospectus
dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>

</FONT>
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<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TABLE OF CONTENTS</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><FONT face="helvetica,arial">Page</FONT></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#101'>Prospectus
    Summary</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#102'>Risk
    Factors</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#103'>Special
    Note&nbsp;Regarding Forward-Looking Statements</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#104'>Use of
    Proceeds</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#105'>Dividend
    Policy</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#106'>Capitalization</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">32</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#107'>Dilution</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#108'>Selected
    Combined Historical Financial and Operating Data</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">34</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#109'>Management&#146;s
    Discussion and Analysis of Financial Condition and Results of
    Operations</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#110'>Industry
    Overview</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#111'>Business</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">65</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#112'>Management</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">111</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#113'>Certain
    Relationships and Related Party Transactions</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">123</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#114'>Principal and
    Selling Stockholders</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">129</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#115'>Description of
    Indebtedness</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">131</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#116'>Description of
    Capital Stock</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">138</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#117'>Shares
    Eligible for Future Sale</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">141</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#118'>Material
    U.S.&nbsp;Federal Income and Estate Tax Considerations to
    Non-U.S.&nbsp;Holders</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">144</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#119'>Underwriting</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">148</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#120'>Legal
    Matters</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">151</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#121'>Experts</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">151</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#122'>Where You Can
    Find More Information</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">151</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#123'>Index to
    Consolidated Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">F-1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 4pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities offered hereby
in any jurisdiction where, or to any person to whom, it is
unlawful to make such offer or solicitation. The information
contained in this prospectus speaks only as of the date of this
prospectus unless the information specifically indicates that
another date applies. No dealer, salesperson or other person has
been authorized to give any information or to make any
representations other than those contained in this prospectus in
connection with the offer contained herein and, if given or
made, such information or representations must not be relied
upon as having been authorized by us. Neither the delivery of
this prospectus nor any sales made hereunder shall under any
circumstances create an implication that there has been no
change in our affairs or that of our subsidiaries since the date
hereof.
</DIV>

</FONT>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt"><IMG src="y10687y1068702.gif" alt="(Chart)">
</DIV>
</DIV>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "PROSPECTUS SUMMARY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PROSPECTUS SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This summary highlights information contained elsewhere in
this prospectus. You should read the entire prospectus
carefully, including the section entitled &#147;Risk
Factors&#148; and our financial statements and the related notes
included elsewhere in this prospectus, before making an
investment decision. Unless the context suggests otherwise,
references in this prospectus to &#147;Brookdale,&#148; the
&#147;Company,&#148; &#147;we,&#148; &#147;us&#148; and
&#147;our&#148; refer to Brookdale Senior Living Inc. and its
subsidiaries and predecessor entities. References in this
prospectus to &#147;Fortress&#148; refer to Fortress Investment
Holdings LLC and certain of its affiliates. Unless the context
suggests otherwise, references in this prospectus to our
financial and operating information is intended to be pro forma
for the formation transactions described in
&#147;Business&nbsp;&#151; History.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Brookdale Senior Living Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are the third largest operator of senior living facilities in
the United States based on total capacity with over 380
facilities in 32&nbsp;states and the ability to serve over
30,000 residents. We offer our residents access to a full
continuum of services across all sectors of the senior living
industry. As of June&nbsp;30, 2005, we operated 81 independent
living facilities with 14,619&nbsp;units, 291 assisted living
facilities with 12,342&nbsp;beds, eight continuing care
retirement communities, or CCRCs, with 3,238&nbsp;units/beds
(including 825&nbsp;resident-owned cottages on our CCRC campuses
managed by us) and one skilled nursing facility with
82&nbsp;units/beds. The majority of our units/beds are located
in campus settings or facilities containing multiple services,
including CCRCs. As of June&nbsp;30, 2005, our facilities were
on average&nbsp;88.1% occupied. We generate over 98% of our
revenues from private pay customers, which limits our exposure
to government reimbursement risk. In addition, we control the
operating economics of our facilities through property ownership
and long-term leases. We believe we operate in the most
attractive sectors of the senior living industry with
significant opportunities to increase our revenues through
providing a combination of housing, hospitality services and
health care services. For the three months ended March&nbsp;31,
2005, 13.7% of our revenues were generated from owned
facilities, 85.8% from leased facilities and 0.5% from
management fees from facilities we operate on behalf of third
parties and affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were formed in June 2005 for the purpose of combining two
leading senior living operating companies, Brookdale Living
Communities, Inc., or BLC, and Alterra Healthcare Corporation,
or Alterra. BLC and Alterra have been operating independently
since 1986 and 1981, respectively. Since December 2003, BLC and
Alterra have been under the common control of Fortress. Fortress
is not selling any shares of common stock in this offering.
Following this offering, Fortress will own
43,157,000&nbsp;shares, or over 60%, of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We plan to grow our revenue and operating income through a
combination of: (i)&nbsp;organic growth in our existing
portfolio; (ii)&nbsp;acquisitions of additional operating
companies and facilities; and (iii)&nbsp;the realization of
economies of scale, including those created by the BLC and
Alterra combination. Given the size and breadth of our
nationwide platform, we believe that we are well positioned to
invest in a broad spectrum of assets in the senior living
industry. Since January 2001, we have begun leasing or acquired
the ownership or management of 52 senior living facilities with
approximately 11,000 units/beds. In 2005, we acquired the
ownership or management of 16 senior living facilities with
4,266&nbsp;units/beds (including 825 resident-owned cottages on
our CCRC campuses managed by us) and an additional facility with
233&nbsp;units/beds, which is currently under contract for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the senior living industry is the preferred
alternative to meet the growing demand for a cost-effective
residential setting in which to care for the elderly who cannot,
or as a lifestyle choice choose not to, live independently due
to physical or cognitive frailties and who may, as a result,
require assistance with some of the activities of daily living
or the availability of nursing or other medical care. Housing
alternatives for seniors include a broad spectrum of senior
living service and care options, including independent living,
assisted living, memory care and skilled nursing care. More
specifically, senior living consists of a combination of housing
and the availability of 24-hour a day personal support services
and assistance with certain activities of daily living.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">1

</FONT>
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<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our facilities are predominantly concentrated in the independent
and assisted living portion of the senior housing continuum as
depicted below:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SENIOR HOUSING CONTINUUM OF CARE</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10687y1068700.gif" alt="(SENIOR HOUSING CHART)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that factors contributing to the growth of the senior
living industry include: (i)&nbsp;the aging of the
U.S.&nbsp;population; (ii)&nbsp;consumer preference for greater
independence in a residential setting as compared to
institutional settings, such as skilled nursing facilities; and
(iii)&nbsp;the decreasing ability of relatives to, or choice by
relatives not to, provide care for the elderly in the home.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2004, and the three months
ended March&nbsp;31, 2005, we generated:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma(1)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">($ in millions)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">790.2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility Operating Income(2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290.7</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net Income (Loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjusted EBITDA(3)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">81.9</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash Earnings(4)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7.9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24.2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    See &#147;Summary Combined Financial Information&#148; and
    &#147;Unaudited Pro Forma Condensed Financial Information&#148;
    for a description of the adjustments included in the pro forma
    results.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Facility Operating Income is a non-GAAP financial measure we use
    in evaluating our performance. See &#147;Summary Combined
    Financial Information&#148; for a computation of this measure
    and &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&nbsp;&#151; Non-GAAP
    Financial Measures&nbsp;&#151; Facility Operating Income&#148;
    for a detailed description of why we believe such measure is
    useful.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Adjusted EBITDA is a non-GAAP financial measure we use in
    evaluating our performance. See &#147;Summary Combined Financial
    Information&#148; for a reconciliation of this measure to net
    income and &#147;Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations&nbsp;&#151;
    Non-GAAP Financial Measures&nbsp;&#151; Adjusted EBITDA&#148;
    for a detailed description of why we believe such measure is
    useful.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Cash Earnings is a non-GAAP financial measure we use in
    evaluating our performance. See &#147;Summary Combined Financial
    Information&#148; for a reconciliation of this measure to net
    income and &#147;Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations&nbsp;&#151;
    Non-GAAP Financial Measures&nbsp;&#151; Cash Earnings&#148; for
    a detailed description of why we believe such measure is useful.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">2

</FONT>
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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Industry Trends</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior living industry has evolved to meet the growing
demand for senior care generated by an aging population
demanding new and better housing alternatives. We believe that
we are well positioned to capitalize on a number of trends in
the senior living industry, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>An increasing number of seniors with longer life
    expectancies and financial resources to support a private pay
    model.</I></B> According to the U.S.&nbsp;Census Bureau, the
    population greater than 65&nbsp;years old is expected to
    increase to approximately 20% of the overall
    U.S.&nbsp;population during the next 25&nbsp;years, from
    approximately 12% in 2000. As life expectancy continues to
    increase and the elderly continue to become a higher percentage
    of the total U.S.&nbsp;population, we believe the demand for
    service-based senior housing will increase. In addition, seniors
    in the areas in which we operate tend to have a significant
    amount of assets generated from savings, pensions and, due to
    strong national housing markets, the sale of private homes. We
    believe seniors increasingly will have the ability to afford
    senior living services.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Fragmentation in the industry provides significant
    acquisition and consolidation opportunities.</I></B> The senior
    living industry&#146;s independent living and assisted living
    segments are large and fragmented, characterized predominantly
    by numerous local and regional operators. According to the
    American Seniors Housing Association, or ASHA, the top five
    operators of senior living facilities measured by total resident
    capacity control only 7% of the total capacity. In addition,
    according to ASHA, only the top five managers operate more than
    14,000 senior living units/beds. We believe that this
    fragmentation provides significant acquisition and consolidation
    opportunities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Majority of independent and assisted living revenue growth
    generated from private pay sources.</I></B> Because we generate
    over 98% of our revenues from private pay customers, our
    resident fees are not constrained by regulatory or other
    governmental considerations. Independent and assisted living
    services are not generally reimbursable under government
    reimbursement programs such as Medicare and Medicaid, and thus
    we have limited exposure to reimbursement risk.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Favorable and improving supply and demand balance.</I></B>
    We believe that the number of vacant senior living units has
    declined steadily over the past several years. According to
    ASHA, the number of new senior housing units identified as under
    construction has declined approximately 60% from
    65,879&nbsp;units in 1999 to 26,355&nbsp;units in 2004. Combined
    with increasing life expectancies, we believe there is a
    favorable and improving supply and demand balance.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Growth Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our objective is to increase our revenues, Adjusted EBITDA, Cash
Earnings and dividends per share of our common stock, while
remaining one of the premier senior living providers in the
United States. Key elements of our strategy to achieve these
objectives include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Organic growth in our existing operations.</I></B> We plan
    to grow our existing operations by:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="5%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;</TD>
    <TD align="left">
    increasing revenues through a combination of occupancy growth
    and resident fee increases as a result of growing demand for
    senior living facilities. For the 343 facilities we have owned,
    leased or managed since 2003 (excluding four development
    facilities), our facility operating income has increased
    approximately 7.0% on an annualized basis and, including the
    four development facilities, our facility operating income has
    increased approximately 8.0% on an annualized basis;&nbsp;and</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">3

</FONT>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<FONT face="helvetica,arial">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="5%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;</TD>
    <TD align="left">
    taking advantage of our sophisticated operating and marketing
    expertise to retain existing residents and attract new residents
    to our facilities. As of June&nbsp;30, 2005, our facilities were
    on average&nbsp;88.1% occupied.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Growth through operating efficiencies.</I></B> We intend
    to utilize our expertise and size to capitalize on economies of
    scale resulting from our national platform. Our geographic
    footprint and centralized infrastructure provide us with a
    significant operational advantage over local and regional
    operators of senior living facilities. As a result, we are able
    to achieve economies of scale with respect to the goods and
    services we purchase. In connection with the combination of BLC
    and Alterra, we have negotiated new contracts for food,
    insurance and other services. In addition, we will reduce the
    size of our corporate workforce through a consolidation of
    corporate functions such as accounting, finance, human resources
    and legal. Collectively, we expect these initiatives to result
    in recurring operating and general and administrative expense
    savings, net of additional recurring costs expected to be
    incurred as a public company, of between approximately
    $13.0&nbsp;million and $15.0&nbsp;million per year. We began to
    realize these savings upon the completion of our formation
    transactions
    in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005.
    See &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&nbsp;&#151; Formation
    Transactions.&#148; As we continue to grow both organically and
    through acquisitions, we expect to have further opportunities to
    realize other synergies and operating efficiencies.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Growth through the acquisition and consolidation of asset
    portfolios and other senior living companies.</I></B> We plan to
    take advantage of the fragmented independent living and assisted
    living sectors by selectively purchasing existing operating
    companies and facilities. Since January 2001, we have begun
    leasing or acquired the ownership or management of 52 senior
    living facilities with approximately 11,000&nbsp;units/beds. In
    2005, we acquired the ownership or management of 16&nbsp;senior
    living facilities with 4,266&nbsp;units/beds (including
    825&nbsp;resident-owned cottages on our CCRC campuses managed by
    us) and an additional facility with 233&nbsp;units/beds, which
    is currently under contract for sale. Our acquisition strategy
    will continue to focus primarily on facilities where we can
    improve service delivery, occupancy rates and cash flow. We
    expect to finance our acquisitions, on a long-term basis, by
    using primarily equity issuances combined with fixed- and
    floating-rate debt.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Expansion of existing facilities where economically
    advantageous.</I></B> Certain of our facilities with stabilized
    occupancies and excess demand in their respective markets may
    benefit from additions and expansions offering increased
    capacity, as well as additional levels of service for residents
    requiring higher levels of care. Furthermore, the expansion of
    existing facilities allows us to enhance our facility-level
    return on investment by increasing the revenue base at a
    facility with lower incremental operating costs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competitive Strengths</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe our nationwide network of senior living facilities is
well positioned to benefit from the growth and increasing demand
in the industry. Some of our most significant competitive
strengths are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Skilled management team with extensive experience.</I></B>
    Our senior management team has extensive experience in
    acquiring, operating and managing a broad range of senior living
    assets. Our chairman and top five executive officers have over
    115&nbsp;years of combined experience in the senior living,
    hospitality and real estate industries. In addition, as
    stockholders, our management team is incentivized to continue to
    grow our business. Following this offering, our senior
    management team will own
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
    of our common stock on a fully diluted basis.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Proven track record of successful acquisitions.</I></B>
    Since January 2001, we have begun leasing or acquired the
    ownership or management of 52 senior living facilities with
    approximately</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">4

</FONT>
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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<FONT face="helvetica,arial">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    11,000&nbsp;units/beds. Our experience in acquiring senior
    living facilities enables us to consider a wide range of
    acquisition targets in the senior living industry. In addition,
    we believe our expertise in integrating these facilities onto
    our operating platform enables us to acquire facilities while
    causing minimal disruption to either the residents or facility
    operating staff.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>High-quality purpose-built facilities.</I></B> We operate
    a nationwide base of over 380 purpose-built facilities in
    32&nbsp;states, including 66 facilities in eight of the top ten
    standard metropolitan statistical areas, or SMSAs. The average
    age of our facilities is 9.7&nbsp;years. We have experienced
    significant facility operating income growth and occupancy
    growth over the past year. Our facility operating income
    increased 16.4%, from $54.8&nbsp;million for the three months
    ended March&nbsp;31, 2004 to $63.8&nbsp;million for the three
    months ended March&nbsp;31, 2005, and our occupancy rate
    increased 0.7%, from 86.8% as of March&nbsp;31, 2004 to 87.5% as
    of March&nbsp;31, 2005. For the 347 and 343 (excluding four
    development facilities) facilities we have operated since
    January 2004, our facility operating income increased 8.7% and
    7.4%, respectively, for the three months ended March&nbsp;31,
    2005, as compared to the three months ended March&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Ability to provide a broad spectrum of care.</I></B> Given
    our diverse mix of independent and assisted living facilities
    and CCRCs, we are able to meet a wide range of our
    customers&#146; needs. We believe that we are one of the few
    companies in the senior living industry with this capability. We
    believe that our multiple product offerings create marketing
    synergies and cross-marketing opportunities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>The size of our business allows us to realize cost
    efficiencies.</I></B> We are the third largest operator of
    senior living facilities in the United States based on total
    capacity. The size of our business allows us to realize cost
    savings in the purchasing of goods and services and also allows
    us to achieve increased efficiencies with respect to various
    corporate functions, most of which have yet to be realized in
    our operating results given the recent combination of BLC and
    Alterra
    in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005.
    In addition, our size and broad geographical footprint give us
    an advantage in executing our acquisition strategy. When we
    acquire a facility in a location where we already operate, we
    are able to integrate the additional facility with limited or no
    incremental cost. This allows us to acquire assets more
    efficiently and to better compete for acquisitions against other
    operators with a more geographically limited presence.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Formation Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a holding company formed in June 2005 for the purpose of
combining, through a series of mergers, two leading senior
living operating companies, BLC and Alterra, which have been
operating independently since 1986 and 1981, respectively.
Fortress has been the majority owner of BLC since September 2000
and of Alterra since December 2003. As a result of the formation
transactions completed
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
prior to the consummation of this offering, all of our
outstanding common stock is held by affiliates of Fortress, an
affiliate of Capital&nbsp;Z Partners, Emeritus Corporation,
NW&nbsp;Select LLC and members of our management. Each of
Emeritus and NW Select is selling all of the shares of our
common stock it owns in this offering. Fortress and its
affiliates are not selling any of the shares of our common stock
that they own in this offering. See &#147;Business&nbsp;&#151;
History&#148; for a more detailed description of these formation
transactions and &#147;Certain Relationships and Related Party
Transactions&#148; for a more detailed description of our
relationships with these stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we recently acquired, through affiliates of
Fortress, 16 additional senior living facilities, not including
one facility currently under contract for sale. See
&#147;Business&nbsp;&#151; History&nbsp;&#151; Acquisition and
History of Alterra Healthcare Corporation&#148; and
&#147;Business&nbsp;&#151; History&nbsp;&#151; Acquisition and
History of Fortress CCRC Portfolio&#148; for a detailed
description of these acquisitions.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">5

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risk Factors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An investment in our common stock is subject to a number of
risks and uncertainties. Before investing in our common stock,
you should carefully consider the following, as well as the more
detailed discussion of risk factors and other information
included in &#147;Risk Factors&#148; and elsewhere in this
prospectus:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Our operating businesses were recently transferred to us and we
    have a limited operating history on a combined basis;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    We have a history of losses; one of our operating subsidiaries,
    Alterra Healthcare Corporation, emerged from Chapter&nbsp;11
    bankruptcy reorganization in December 2003 and we may not be
    able to achieve profitability;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    We may not be able to generate sufficient cash flow to cover
    required interest and long-term operating lease payments, which
    could result in defaults of the related debt or operating leases
    or cross-defaults under other debt or operating leases;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Our indebtedness and long-term operating leases could adversely
    affect our financial condition;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    If we do not effectively manage our growth, our business and
    financial results could be adversely affected;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    If the ownership of our common stock continues to be highly
    concentrated, it may prevent you and other stockholders from
    influencing significant corporate decisions and may result in
    conflicts of interest.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Executive Offices</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our principal executive offices are located at 330&nbsp;North
Wabash, Suite&nbsp;1400, Chicago, Illinois 60611. Our telephone
number is 312-977-3700. Our internet address is
www.brookdaleliving.com. Information on our website does not
constitute part of this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we maintain an operations support center at
6737&nbsp;W.&nbsp;Washington St., Suite&nbsp;2300, Milwaukee,
Wisconsin 53214. Our telephone number at this center is
414-918-5000.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">6

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE OFFERING</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <B>Common stock offered by us in this offering</B></TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B>Common stock offered by selling stockholders in this
    offering</B></TD>
    <TD></TD>
    <TD valign="top">
    4,172,000&nbsp;shares. All shares of common stock being offered
    by the selling stockholders pursuant to this prospectus are
    being offered by Emeritus Corporation and NW Select LLC. Each of
    the selling stockholders is selling all of its shares of common
    stock pursuant to this offering. Following this offering,
    neither Emeritus Corporation nor NW Select LLC will own any
    shares of our common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B>Common stock to be outstanding after this offering</B></TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B>Use of proceeds</B></TD>
    <TD></TD>
    <TD valign="top">
    We expect to use the net proceeds from the sale of the shares of
    common stock we are offering for repayment of certain of our
    outstanding indebtedness, acquisition of additional senior
    living operating companies and facilities and other general
    corporate purposes. See &#147;Use of Proceeds.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    We will not receive any proceeds from the sale of shares of
    common stock offered by the selling stockholders.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B>Dividend policy</B></TD>
    <TD></TD>
    <TD valign="top">
    On &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, we paid a dividend of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share of our common stock, or an aggregate of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
    We intend to continue to pay regular quarterly dividends to the
    holders of our common stock. The payment of dividends is subject
    to the discretion of our board of directors and will depend on
    many factors, including our results of operations, financial
    condition and capital requirements, earnings, general business
    conditions, restrictions imposed by financing arrangements,
    legal restrictions on the payment of dividends and other factors
    the board of directors deems relevant. We expect that in certain
    quarters we may pay dividends that exceed our net income amounts
    for such period as calculated in accordance with generally
    accepted accounting principals, or GAAP.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B>Proposed New York Stock Exchange symbol</B></TD>
    <TD></TD>
    <TD valign="top">
    &#147;BKD&#148;.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">7

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SUMMARY COMBINED FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following tables summarize the combined financial
information for our business. You should read these tables along
with &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations,&#148;
&#147;Business&#148; and our combined financial statements and
the related notes included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We derived the summary historical combined statements of
operations data for each of the three years in the period ended
December&nbsp;31, 2004, set forth below, from our audited
combined financial statements included elsewhere in this
prospectus. The statements of operations data for the three
months ended March&nbsp;31, 2005 and 2004 and the balance sheet
data as of March&nbsp;31, 2005 are derived from our unaudited
condensed combined interim financial statements included
elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The summary pro forma condensed combined statement of operations
data for the year ended December&nbsp;31, 2004 and the three
months ended March&nbsp;31, 2005 and the summary pro forma
condensed combined balance sheet data as of March&nbsp;31, 2005
are unaudited and have been derived from our historical combined
financial statements, adjusted to give effect to the events
noted below, as if such events had occurred on January&nbsp;1,
2004 with respect to the pro forma condensed combined statement
of operations data and as of March&nbsp;31, 2005 with respect to
the pro forma condensed combined balance sheet data.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The summary pro forma condensed combined statement of operations
data for the year ended December&nbsp;31, 2004 and the three
months ended March&nbsp;31, 2005 include the following
adjustments: (1)&nbsp;the $982.8&nbsp;million sale-leaseback to
Provident Senior Living Trust, or Provident, (2)&nbsp;the lease
of 15 facilities from Ventas Realty, Limited Partnership, or
Ventas, (3)&nbsp;the $20.4&nbsp;million purchase of facilities
currently leased, (4)&nbsp;the issuance of $182.0&nbsp;million
of mortgage loans and repayment of $178.8&nbsp;million of
then-outstanding mortgage loans, (5)&nbsp;the repayment of
$62.2&nbsp;million of indebtedness from the proceeds of this
offering, (6)&nbsp;the termination of certain forward interest
rate swaps, (7)&nbsp;the repayment of $2.2&nbsp;million of
lessor advances and (8)&nbsp;the acquisition of the Fortress
CCRC Portfolio and the Prudential Portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The condensed combined pro forma balance sheet data as of
March&nbsp;31, 2005 include the following adjustments:
(1)&nbsp;this offering and application of a portion of the
proceeds from this offering to repay $62.2&nbsp;million of
indebtedness, (2)&nbsp;the repayment of $2.2&nbsp;million of
lessor advances, (3)&nbsp;the acquisition of the Fortress CCRC
Portfolio and the Prudential Portfolio and (4)&nbsp;the payment
of a $20.0&nbsp;million dividend by Alterra.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
See our pro forma condensed combined financial statements
included elsewhere in this prospectus for a complete description
of the adjustments made to derive the pro forma condensed
combined statement of operations data and pro forma condensed
combined balance sheet data.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;">8

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<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">as adjusted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">as adjusted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Statement of Operations Data<BR>
    (in thousands, expect per<BR>
    share data):</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">203,264</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">154,583</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">783,846</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">657,327</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">156,894</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">934</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">871</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,050</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,443</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,545</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,368</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,622</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">464</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,953</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Total Revenues</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204,662</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,983</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">155,633</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">790,242</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">660,872</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">222,584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">161,516</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128,042</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110,328</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,810</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">493,100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">415,169</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">133,119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,980</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47,252</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,502</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,825</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">183,606</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,744</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,003</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Compensation Expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,528</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,114</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,263</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,597</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">70,827</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,708</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,331</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,433</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,239</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,233</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,640</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,540</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204,416</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">173,859</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,471</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">800,880</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">611,113</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">202,340</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">150,231</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Income from operations</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,124</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,162</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,638</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,759</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,244</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,285</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense&nbsp;&#151; debt
    and capitalized lease obligation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,807</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,899</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(18,167</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(45,419</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(63,634</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25,106</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,490</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,324</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59,547</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Earnings per share:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Basic
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4.47</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21.87</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(196.42</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717.00</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Diluted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4.47</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21.87</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(196.42</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717.00</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Other Data:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjusted EBITDA(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,368</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,518</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,562</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">81,935</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">104,394</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,287</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28,600</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash Earnings(2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,861</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,154</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,620</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,171</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,870</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,784</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,823</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility Operating Income(3)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75,222</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63,784</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54,773</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290,746</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">242,158</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84,097</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63,914</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Number of facilities (at end of
    period)(4)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">381</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">366</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">359</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">381</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">367</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">359</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total units operated(4)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,281</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,109</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,423</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,281</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,208</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,423</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,334</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Occupancy rate at end of period(5)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">87.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">91.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Average monthly revenue per unit
    (same store)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,880</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,815</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,827</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,660</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,516</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    We believe Adjusted EBITDA is useful to an investor in
    evaluating our performance as it is one of the primary measures
    used by our management team to evaluate our operations and is
    commonly used in our industry. Adjusted EBITDA consists of net
    income (loss) before non-operating (income) loss, depreciation
    and amortization, (gain)&nbsp;loss on extinguishment of debt,
    loss on sale of properties, straight-line lease expense
    (income), amortization of deferred gain, amortization of
    deferred entrance fees and non-cash compensation expense, and
    including entrance fee receipts and refunds. See
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&nbsp;&#151; Non-GAAP
    Financial Measures&nbsp;&#151; Adjusted EBITDA&#148; for a more
    detailed discussion of why we believe it is a useful measure.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    We believe Cash Earnings is useful to an investor in evaluating
    our performance as it is one of the primary measures used by our
    management team to evaluate our operations and to assess our
    capacity to pay dividends. Cash Earnings consists of net income
    (loss) before non-operating (income) loss, depreciation and
    amortization, (gain)&nbsp;loss on extinguishment of debt, loss
    on sale of properties, straight-line lease expense (income),
    amortization of deferred gain, amortization of deferred entrance
    fees and non-cash compensation expense, and including entrance
    fee receipts and refunds, and after interest expense (including
    capitalized lease expense), interest income and recurring
    capital expenditures. See &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of
    Operations&nbsp;&#151; Non-GAAP Financial Measures&nbsp;&#151;
    Cash Earnings&#148; for a more detailed discussion of why we
    believe it is a useful measure.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    We believe Facility Operating Income is useful to an investor in
    evaluating our performance as it is one of the primary measures
    used by our management team to evaluate our operating
    performance. Facility Operating Income consists of resident fees
    less facility operating expenses. See &#147;Management&#146;s
    Discussion and Analysis of Financial Condition and Results of
    Operations&nbsp;&#151; Non-GAAP Financial Measures&nbsp;&#151;
    Facility Operating Income&#148; for a more detailed discussion
    of why we believe it is a useful measure.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Excludes facilities held for sale.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Excludes facilities held for sale and facilities managed by us.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">9

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The reconciliation of net income (loss) to Adjusted EBITDA and
Cash Earnings is as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">as Adjusted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">as Adjusted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,324</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59,547</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of a change in
    accounting principle, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,208</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(26</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">70</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">820</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(31</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">722</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">643</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Provision (benefit) for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">166</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">166</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(713</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,921</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,111</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">139</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,666</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">974</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">114</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">114</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in (earnings)&nbsp;loss of
    unconsolidated ventures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">373</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">931</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">931</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(318</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(584</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss (gain)&nbsp;extinguishment of
    debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">625</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">453</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(263</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,051</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,511</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on sale of properties
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,513</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,531</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,623</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,236</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37,636</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">55,851</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,484</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,490</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capitalized lease obligation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,276</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,276</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,931</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,783</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,783</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">622</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in fair value of derivatives
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,062</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,832</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,176</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(435</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(362</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(224</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,182</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(637</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(14,037</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(18,004</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,124</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,162</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,638</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,759</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,244</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,285</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,263</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,597</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">70,827</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,708</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Straight-line lease expense (income)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,094</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,094</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,422</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,588</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,102</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,837</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of deferred gain
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,448</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,296</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,260</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(539</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(230</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Non-cash compensation expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,528</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,114</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(464</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,953</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Entrance fee receipts
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">686</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,185</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Entrance fee disbursements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(537</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,571</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Adjusted EBITDA</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,368</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,518</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,562</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">81,935</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">104,394</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,287</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28,600</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,531</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,623</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,236</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(37,636</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(55,851</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(24,484</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,490</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capitalized lease obligation(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,983</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,983</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,931</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,783</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,783</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(622</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">435</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">362</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">224</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,182</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">637</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,004</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Recurring capital expenditures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,428</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,428</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,999</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,527</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,527</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,434</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,291</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Cash Earnings</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,861</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,154</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,620</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,171</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,870</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,784</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,823</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Represents cash portion of capitalized lease obligation interest
    expense.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;">10

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The recalculation of facility operating income is as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">as Adjusted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">as Adjusted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">203,264</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">154,583</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">783,846</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">657,327</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">156,894</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128,042</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110,328</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,810</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">493,100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">415,169</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">133,119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,980</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75,222</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63,784</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54,773</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290,746</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">242,158</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84,097</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63,914</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">as of</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">As of</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Combined Balance Sheet Data (in
    thousands):</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,083</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">729,420</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">607,887</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">383,275</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,605</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>
</DIV>

<P align="center" style="font-size: 10pt;">11

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='102'></A>
</DIV>

<!-- link1 "RISK FACTORS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Investing in our common stock involves a high degree of risk.
You should carefully consider the following risk factors, as
well as other information contained in this prospectus, before
deciding to invest in our common stock. Generally, the risks
facing us fall into four categories&nbsp;&#151; risks related to
our business, risks related to our industry, risks related to
our organization and structure and risks related to this
offering. If any of the following events actually occur or risks
actually materialize, our business, financial condition,
operating results and/or cash flow could suffer materially and
adversely. In this case, the trading price of our common stock
could decline and you could lose all or part of your investment.
Additional risks and uncertainties not currently known to us or
that we currently believe to be immaterial also may materially
and adversely affect our business, financial condition,
operating results and/or cash flow.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our operating businesses were recently transferred to us
and we have a limited operating history on a combined
basis.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2005, we were formed for the purpose of combining two
leading senior living operating companies, BLC and Alterra,
through a series of mergers that occurred
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005.
Prior to this combination, we had no operations or assets. We
are therefore subject to the risks generally associated with the
formation of any new business and the combination of existing
businesses, including the risk that we will not be able to
realize expected efficiencies and economies of scale or
implement our business strategies. As such, we have no
meaningful combined and consolidated operating history upon
which investors may evaluate our performance as an integrated
entity and assess our future prospects. In addition, we recently
acquired the ownership or management of 16 additional senior
living facilities, not including one facility currently under
contract for sale. See &#147;Business&nbsp;&#151; History.&#148;
There can be no assurance that we will be able to successfully
integrate and oversee the combined operations of BLC and Alterra
and these additional facilities. Accordingly, our financial
performance to date may not be indicative of our long-term
future performance and may not necessarily reflect what our
results of operations, financial condition and cash flows would
have been had we operated as separate, stand-alone entities
pursuing independent strategies during the periods presented.
Failure to successfully integrate our operations could have a
material adverse effect on our revenues and earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We have a history of losses; one of our operating
subsidiaries, Alterra Healthcare Corporation, emerged from
Chapter&nbsp;11 bankruptcy reorganization in December 2003 and
we may not be able to achieve profitability.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We incurred net losses of approximately $4.5&nbsp;million for
the three months ended March&nbsp;31, 2005, approximately
$21.9&nbsp;million for the year ended December&nbsp;31, 2004 and
approximately $16.5&nbsp;million for the year ended
December&nbsp;31, 2003. In addition, Alterra emerged from
Chapter&nbsp;11 bankruptcy reorganization in December 2003,
approximately 11&nbsp;months after filing a voluntary petition
for bankruptcy reorganization, pursuant to which it sought to
facilitate and complete its ongoing restructuring initiatives.
Prior to its reorganization, Alterra&#146;s overall cash
position had declined to a level that it believed to be
insufficient to operate the company. This resulted in its
failure to make certain scheduled debt service and lease
payments, which caused it to be in default under several of its
principal financing arrangements. The principal components of
Alterra&#146;s restructuring plan were to dispose of selected
under-performing and non-strategic assets and to restructure its
capital structure. Alterra emerged from bankruptcy in December
2003 when it was acquired and recapitalized by FEBC-ALT
Investors LLC, an affiliate of Fortress, Emeritus Corporation
and NW Select LLC. In connection with its reorganization,
Alterra adopted fresh start accounting as of December&nbsp;4,
2003. If we do not effectively manage our cash flow and business
operations going forward or otherwise achieve profitability, our
business, financial condition and results of operations would be
adversely affected.
</DIV>

<P align="center" style="font-size: 10pt;">12

</FONT>

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<B><I>You may not be able to compare our historical financial
information to our current financial information, which will
make it more difficult to evaluate an investment in our common
stock.</I></B>
</DIV>

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As a result of Alterra&#146;s emergence from bankruptcy, we are
operating a portion of our business with a new capital structure
and fewer properties and have adopted fresh start accounting
prescribed by generally accepted accounting principles.
Accordingly, unlike companies that have not previously filed for
bankruptcy protection, a portion of our financial condition and
results of operations are not comparable to the financial
condition and results of operations reflected in Alterra&#146;s
historical financial statements for periods prior to
December&nbsp;4, 2003 contained in this prospectus. Without
historical financial statements to compare to our current
performance, it may be more difficult for you to assess our
future prospects when evaluating an investment in our common
stock.
</DIV>

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<B><I>We may not be able to generate sufficient cash flow to
cover required interest and long-term operating lease payments,
which could result in defaults of the related debt or operating
leases or cross-defaults under other debt or operating
leases.</I></B>
</DIV>

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At March&nbsp;31, 2005, we had $383.3&nbsp;million of
outstanding indebtedness, including $66.3&nbsp;million of
capital and financing lease obligations. In addition, in
connection with the acquisition of the Fortress CCRC Portfolio
and the Prudential Portfolio, we incurred an additional
$276.8&nbsp;million aggregate amount of indebtedness. We intend
to continue financing our facilities through mortgage financing,
long-term operating leases and other types of financing,
including borrowings under our lines of credit and future credit
facilities we may obtain. We cannot give any assurance that we
will generate sufficient cash flow from operations to cover
required interest, principal and lease payments. Any non-payment
or other default under our financing arrangements could, subject
to cure provisions in the case of a debt financing, cause the
lender to foreclose upon the facility or facilities securing
such indebtedness or, in the case of a lease, cause the lessor
to terminate the lease, with a consequent loss of income and
asset value to us. In some cases, indebtedness is secured by
both a mortgage on a facility (or facilities) and a guaranty by
us, BLC and/or Alterra. In the event of a default, the lender
could avoid judicial procedures required to foreclose on real
property by declaring all amounts outstanding under the guaranty
immediately due and payable, and requiring the respective
guarantor to fulfill its obligations to make such payments.
Additionally, a foreclosure on any of our properties could cause
us to recognize taxable income, even if we did not receive any
cash proceeds in connection with such foreclosure. Further,
because our mortgages and operating leases generally contain
cross-default and cross-collateralization provisions, a default
by us could affect a significant number of facilities, financing
arrangements and operating leases.
</DIV>

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In addition, as of March&nbsp;31, 2005, our lessors have
invested a total of $1,874.4&nbsp;million, which includes
capital and financing leases of $66.3&nbsp;million, in
facilities that we lease from them. Lease financing transactions
carry an inherently higher level of leverage than debt
financings. For the three months ended March&nbsp;31, 2005, our
overall lease coverage in our leased portfolio was 1.22 to 1.00
(measuring coverage before capital spending reserves and central
management costs).
</DIV>

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<B><I>Our indebtedness and long-term operating leases could
adversely affect our financial condition.</I></B>
</DIV>

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At March&nbsp;31, 2005, we had approximately $383.3&nbsp;million
of outstanding indebtedness, including $66.3&nbsp;million of
capital and financing lease obligations, and we may incur
additional indebtedness or enter into additional leases in the
future. In addition, in connection with the acquisition of the
Fortress CCRC Portfolio and the Prudential Portfolio, we
incurred an additional $276.8&nbsp;million aggregate amount of
indebtedness. Our level of indebtedness and our long-term
operating leases
</DIV>

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could adversely affect our future operations and/or impact our
stockholders, including, without limitation:
</DIV>

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    <TD width="1%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    We may have little or no cash flow apart from cash flow that is
    dedicated to the payment of any interest, principal or
    amortization required with respect to outstanding indebtedness
    and lease payments with respect to our long-term operating
    leases;</TD>
</TR>

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    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Increases in our outstanding indebtedness, leverage and
    long-term operating leases will increase our vulnerability to
    adverse changes in general economic and industry conditions, as
    well as to competitive pressure;</TD>
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    <TD>&#149;&nbsp;</TD>
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    Increases in our outstanding indebtedness may limit our ability
    to obtain additional financing for working capital, capital
    expenditures, acquisitions, general corporate and other
    purposes;&nbsp;and</TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Our ability to satisfy our obligations with respect to holders
    of our capital stock may be limited.</TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our ability to make payments of principal and interest on our
indebtedness and to make lease payments on our operating leases
depends upon our future performance, which will be subject to
general economic conditions, industry cycles and financial,
business and other factors affecting our operations, many of
which are beyond our control. Our business might not continue to
generate cash flow at or above current levels. If we are unable
to generate sufficient cash flow from operations in the future
to service our debt or to make lease payments on our operating
leases, we may be required, among other things, to seek
additional financing in the debt or equity markets, refinance or
restructure all or a portion of our indebtedness, sell selected
assets, reduce or delay planned capital expenditures or delay or
abandon desirable acquisitions. Such measures might not be
sufficient to enable us to service our debt or to make lease
payments on our operating leases. In addition, any such
financing, refinancing or sale of assets might not be available
on economically favorable terms to us.
</DIV>

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<B><I>Our existing credit facilities, mortgage loans and
sale-leaseback arrangements contain covenants that restrict our
operations and any default under such facilities, loans or
arrangements could result in the acceleration of indebtedness or
termination of the leases and may inhibit our ability to grow
our business and increase revenues.</I></B>
</DIV>

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As of March&nbsp;31, 2005, we had $383.3&nbsp;million of
outstanding indebtedness, including $66.3&nbsp;million of
capital and financing lease obligations. In addition, in
connection with the acquisition of the Fortress CCRC Portfolio
and the Prudential Portfolio, we incurred an additional
$276.8&nbsp;million aggregate amount of indebtedness. Our
outstanding indebtedness and leases contain restrictions and
covenants and require us to maintain or satisfy specified
financial ratios and coverage tests. Pursuant to these
covenants, we must satisfy ongoing financial covenants,
including maintaining debt service and lease coverage ratios on
a consolidated basis and on a facility or facilities basis based
on the debt securing the facilities. In addition, certain of our
leases require us to maintain lease coverage ratios on a lease
portfolio basis (each as defined in the agreements) and maintain
stockholders&#146; equity or tangible net worth amounts. The
debt service coverage ratios are generally calculated as
revenues less operating expenses, including an implied
management fee and a reserve for capital expenditures, divided
by the debt (principal and interest) or lease payment. The
stockholders&#146; equity is calculated in accordance with GAAP,
and in certain circumstances less intangible assets or
liabilities, or stockholders&#146; equity plus deferred gains
from sale-leaseback transactions. See &#147;Description of
Indebtedness&#148; for additional restrictive covenants and
lender consents required under our outstanding indebtedness.
</DIV>

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Our outstanding indebtedness and leases are secured by the
facilities and, in certain cases, a guaranty by us, BLC and/or
Alterra. Therefore, an event of default under the outstanding
indebtedness or leases, subject to cure provisions in certain
instances, would give the respective
</DIV>

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lenders or lessors, as applicable, the right to declare all
amounts outstanding to be immediately due and payable, terminate
the lease, foreclose on collateral securing the outstanding
indebtedness and leases and restrict our ability to make
additional borrowings under the outstanding indebtedness or
continue to operate the properties subject to the lease. Certain
of our outstanding indebtedness and leases contain cross-default
provisions so that a default under certain outstanding
indebtedness would cause a default under certain of our
operating leases. Certain of our outstanding indebtedness and
long-term leases also restrict, among other things, our ability
to incur additional debt.
</DIV>

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The substantial majority of our lease arrangements are
structured as master leases. Under a master lease, we may lease
a large number of geographically dispersed properties through an
indivisible lease. As a result, it is difficult to restructure
the composition of the portfolio or economic terms of the lease
without the consent of the landlord. Failure to comply with
Medicare or Medicaid provider requirements is a default under
several of our master lease and debt financing instruments. In
addition, potential defaults related to an individual property
may cause a default of an entire master lease portfolio and
could trigger cross-default provisions in our outstanding
indebtedness and other leases.
</DIV>

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These restrictions may interfere with our ability to obtain
financing or to engage in other business activities, which may
inhibit our ability to grow our business and increase revenues.
If we fail to comply with any of these requirements, then the
related indebtedness could become immediately due and payable.
We cannot assure you that we could pay this debt if it became
due.
</DIV>

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Certain of our master leases contain radius restrictions which
limit our ability to develop or acquire new facilities within a
specified distance from certain existing facilities covered by
such master leases.
</DIV>

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<B><I>Mortgage debt and long-term lease obligations expose us to
increased risk of loss of property, which could harm our
financial condition.</I></B>
</DIV>

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Mortgage debt and long-term lease obligations increase our risk
of loss because defaults on indebtedness secured by properties
or pursuant to the terms of the lease may result in foreclosure
actions initiated by lenders or lessors and ultimately our loss
of the property securing any loans for which we are in default
or cause the lessor to terminate the lease. For tax purposes, a
foreclosure of any of our properties would be treated as a sale
of the property for a purchase price equal to the outstanding
balance of the debt secured by the mortgage. If the outstanding
balance of the debt secured by the mortgage exceeds our tax
basis in the property, we would recognize taxable income on
foreclosure, but would not receive any cash proceeds, and our
earnings could be negatively impacted. Further, our mortgage
debt and long-term leases generally contain cross-default and
cross-collateralization provisions and a default on one facility
could affect a significant number of our facilities, financing
arrangements and operating leases.
</DIV>

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<B><I>If we do not effectively manage our growth, our business
and financial results could be adversely affected.</I></B>
</DIV>

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We plan to grow organically through our existing operations,
through selectively purchasing existing senior living operating
companies and facilities, and through the expansion of our
existing facilities. In 2005, we have already acquired the
ownership or management of 16 senior living facilities with
4,266&nbsp;units/beds (including 825 resident-owned cottages on
our CCRC campuses managed by us) and an additional facility with
233 units/beds, which is currently under contract for sale. This
growth will place significant demands on our current management
resources. Our ability to manage our growth effectively and to
successfully integrate new acquisitions and expansions into our
existing business will require us to continue to expand our
operational, financial and management information systems and to
continue to retain, attract, train, motivate and manage key
employees. Also, the additional facilities will require us to
maintain consistent quality control measures that allow our
management to effectively identify deviations that result in
delivering care and services that are substandard, which may
result in litigation and/or loss of licensure or certification.
If we are unable to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
manage our growth effectively and successfully integrate new
acquisitions and expansions into our existing business or
maintain consistent quality control measures, our business,
financial condition and results of operations could be adversely
affected.
</DIV>

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<B><I>Unforeseen costs associated with the acquisition of new
facilities could reduce our profitability.</I></B>
</DIV>

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Our growth strategy contemplates future acquisitions of existing
senior living operating companies and facilities. Facilities
that we may acquire in the future may generate unexpectedly low
or no returns or may not meet a risk profile that our investors
find acceptable. In addition, we might encounter unanticipated
difficulties and expenditures relating to any of the acquired
facilities, including contingent liabilities, or newly acquired
facilities might require significant management attention that
would otherwise be devoted to our ongoing business. These costs
may negatively affect our results of operations.
</DIV>

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<B><I>Competition for the acquisition of strategic assets from
buyers with lower costs of capital than we are able to obtain
could limit our ability to grow our business effectively.</I></B>
</DIV>

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Several real estate investment trusts, or REITs, have similar
asset acquisition objectives as we do, along with greater
financial resources and lower costs of capital than we are able
to obtain. This may increase competition for acquisitions that
would be suitable to us, making it more difficult for us to
compete and successfully implement our growth strategy. There is
significant competition among potential acquirors in the senior
living industry, including REITs, and there can be no assurance
that we will be able to successfully implement our growth
strategy or complete acquisitions, which could limit our ability
to grow our business effectively.
</DIV>

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<B><I>We may need additional capital to fund our operations and
finance our growth, and we may not be able to obtain it on terms
acceptable to us, or at all.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Continued expansion of our business through the acquisition of
existing senior living operating companies and facilities and
expansion of our existing facilities may require additional
capital, particularly if we were to accelerate our acquisition
and expansion plans. Financing may not be available to us or may
be available to us only on terms that are not favorable. In
addition, certain of our outstanding indebtedness and long-term
leases also restrict, among other things, our ability to incur
additional debt. If we are unable to raise additional funds or
obtain it on terms acceptable to us, we may have to delay or
abandon some or all of our growth strategies. Further, if
additional funds are raised through the issuance of additional
equity securities, the percentage ownership of our stockholders
would be diluted. See &#147;Dilution.&#148; Any newly issued
equity securities may have rights, preferences or privileges
senior to those of our common stock. See &#147;Description of
Capital Stock.&#148;
</DIV>

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<B><I>Due to the dependency of our revenues on private pay
sources, events which adversely affect the ability of seniors to
afford our monthly resident fees could cause our revenues and
results of operations to decline.</I></B>
</DIV>

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Costs to seniors associated with independent and assisted living
services are not generally reimbursable under government
reimbursement programs such as Medicare and Medicaid.
Accordingly, over 98% of our resident fee revenues are derived
from private pay sources consisting of income or assets of
residents and/or their family members. Only seniors with income
or assets meeting or exceeding the comparable median in the
regions where our facilities are located typically can afford to
pay our monthly resident fees. Economic downturns or changes in
demographics could adversely affect the ability of seniors to
afford our resident fees. In addition, downturns in the housing
markets would adversely affect the ability of seniors to afford
our resident fees as our customers frequently use the proceeds
from the sale of their homes to cover the cost of our fees. If
we are unable to retain and/or attract seniors with sufficient
income, assets or other resources required to pay the fees
associated with independent and assisted living services, our
revenues and results of operations would decline.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>The geographic concentration of our facilities could leave
us vulnerable to an economic downturn, regulatory changes or
acts of nature in those areas, resulting in a decrease in our
revenues and results of operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On a pro forma basis, for the three months ended March&nbsp;31,
2005, our facilities located in Florida accounted for
approximately 13% of our revenue, our facilities located in
Illinois accounted for approximately 10% of our revenue and our
facilities located in California accounted for approximately 9%
of our revenue. As a result of this concentration, the
conditions of the economies and the real estate markets, changes
in governmental rules and regulations, particularly with respect
to assisted living facilities, acts of nature and other factors
that may result in a decrease in demand for senior living
services in these states could have an adverse effect on our
revenues and results of operations. In addition, since these
facilities are located in Florida and California, we are
particularly susceptible to revenue loss and damage caused by
hurricanes or other severe weather conditions or natural
disasters such as earthquakes. Any significant loss due to a
natural disaster may not be covered by insurance and may lead to
an increase in the cost of insurance.
</DIV>

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<B><I>Termination of our resident agreements and vacancies in
the living spaces we lease could adversely affect our revenues
and earnings.</I></B>
</DIV>

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State regulations governing assisted living facilities require
written resident agreements with each resident. Several of these
regulations also require that each resident have the right to
terminate the resident agreement for any reason on reasonable
notice. Consistent with these regulations, several of our
assisted living resident agreements allow residents to terminate
their agreements upon 0 to 30&nbsp;days&#146; notice. Unlike
typical apartment leasing or independent living arrangements
that involve lease agreements with specified leasing periods of
up to a year or longer, in many instances we cannot contract
with our assisted living residents to stay in those living
spaces for longer periods of time. Our independent living
resident agreements generally provide for termination of the
lease upon death or allow a resident to terminate his or her
lease upon the need for a higher level of care not provided at
the facility. The resident is usually obligated to pay rent for
the lesser of 60&nbsp;days after the move out or until the unit
is rented by another resident. If multiple residents terminate
their resident agreements at or around the same time, our
revenues, earnings and occupancy levels could be adversely
affected. In addition, because of the demographics of our
typical residents, including age and health, resident turnover
rates in our facilities are difficult to predict. As a result,
the living spaces we lease may be unoccupied for a period of
time, which could adversely affect our revenues and earnings.
</DIV>

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<B><I>Early termination or non-renewal of our management
agreements could cause a loss in revenues and could negatively
impact earnings.</I></B>
</DIV>

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Approximately 0.5% of our revenues were generated through
third-party management agreements for the three months ended
March&nbsp;31, 2005. Our third-party management agreements
generally have terms of one to five years. In some cases,
subject to our rights to cure defaults, a facility owner may
terminate us as manager if any licenses or certificates
necessary for operation are revoked or upon the sale of the
facility. Under our management agreements in connection with
sale-leaseback transactions, we cannot be terminated as manager
unless we default under the related lease or are otherwise
terminated for cause under the related lease. Early termination
or non-renewal of our management agreements, or renewal on less
favorable terms, could cause a loss in revenues and could
negatively impact earnings.
</DIV>

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<B><I>Increased competition for or a shortage of skilled
personnel could increase our staffing and labor costs.</I></B>
</DIV>

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Our success depends on our ability to retain and attract skilled
management personnel who are responsible for the day-to-day
operations of each of our facilities. Each facility has an
Executive Director or Residence Director, each a Director,
responsible for the overall day-to-day operations of
</DIV>

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the facility, including quality of care, social services and
financial performance. Depending upon the size of the facility,
each Director is supported by a facility staff member who is
directly responsible for day-to-day care of the residents and
either facility staff or regional support to oversee the
facility&#146;s marketing and community outreach programs. Other
key positions supporting each facility may include individuals
responsible for food service, healthcare services, activities,
housekeeping and engineering. We compete with various health
care service providers, including other senior living providers,
in retaining and attracting qualified and skilled personnel.
Increased competition for or a shortage of nurses or other
trained personnel, or general inflationary pressures may require
that we enhance our pay and benefits package to compete
effectively for such personnel. We may not be able to offset
such added costs by increasing the rates we charge to our
residents. If there is an increase in these costs or if we fail
to attract and retain qualified and skilled personnel, our
business and operating results could be harmed.
</DIV>

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<B><I>Departure of our key officers could harm our
business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our future success depends, to a significant extent, upon the
continued service of our senior management personnel,
particularly: Mark J. Schulte, our chief executive officer; Mark
W. Ohlendorf, our co-president; John P. Rijos, our co-president;
R. Stanley Young, our chief financial officer; and Kristin A.
Ferge, our treasurer. If we were to lose the services of any of
these individuals, our business and financial results could be
adversely affected. See &#147;Management.&#148;
</DIV>

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<B><I>Interest rate increases could adversely affect our
earnings.</I></B>
</DIV>

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At March&nbsp;31, 2005, we had approximately $20.3&nbsp;million
and $211.2&nbsp;million of floating-rate debt and lease payment
obligations, respectively, outstanding at a combined
weighted-average floating interest rate of 4.07%. Our unhedged
lease obligations include $180.9&nbsp;million tied to the
tax-exempt bond rates and are subject to interest rate caps at a
weighted average cap rate of 6.17%. This debt, and any unhedged
floating-rate debt incurred in the future, exposes us to
interest rate risk. Therefore, increases in prevailing interest
rates could increase our payment obligations which would
negatively impact earnings. For example, a 1% increase in
interest rates would increase annual interest expense and lease
expense by approximately $0.2&nbsp;million and $2.1&nbsp;million
based on the amount of unhedged floating-rate debt and leases,
respectively.
</DIV>

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<B><I>We may not be able to pay or maintain dividends.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
we paid a dividend of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of our common stock, or an aggregate of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
We intend to continue to pay regular quarterly dividends to the
holders of our common stock. Our ability to pay and sustain cash
dividends is based on many factors, including our ability to
make and finance acquisitions, our ability to negotiate
favorable lease and other contractual terms, anticipated
operating expense levels, the level of demand for our
units/beds, the rates we charge and actual results that may vary
substantially from estimates. Some of the factors are beyond our
control and a change in any such factor could affect our ability
to pay dividends. We can give no assurance as to our ability to
pay or maintain dividends. We also cannot assure you that the
level of dividends will be maintained or increase over time or
that increases in demand for our units/beds and monthly resident
fees will increase our actual cash available for dividends to
stockholders. We expect that in certain quarters we may pay
dividends that exceed our net income amount for such period as
calculated in accordance with GAAP. See &#147;Dividend
Policy.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Environmental contamination associated with any of the
facilities we own or operate could result in substantial
liabilities to us.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under various federal, state and local environmental laws, a
current or previous owner or operator of real property, such as
us, may be held liable in certain circumstances for the costs of
investigation, removal or remediation of certain hazardous or
toxic substances, including, among others, petroleum and
materials containing asbestos, that could be located on, in, at
or under a
</DIV>

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<DIV align="left" style="font-size: 10pt;">
property, regardless of how such materials came to be located
there. Additionally, such an owner or operator of real property
may incur costs relating to the release of hazardous or toxic
substances, including government fines and payments for personal
injuries or damage to adjacent property. The cost of any
required investigation, remediation, removal, mitigation,
compliance, fines or personal or property damages and our
liability therefore could exceed the property&#146;s value
and/or our assets&#146; value. In addition, the presence of such
substances, or the failure to properly dispose of or remediate
the damage caused by such substances, may adversely affect our
ability to sell such property, to attract additional residents
and retain existing residents, to borrow using such property as
collateral or to develop or redevelop such property. In
addition, such laws impose liability for investigation,
remediation, removal and mitigation costs on persons who
disposed of or arranged for the disposal of hazardous substances
at third party sites. Such laws and regulations often impose
liability without regard to whether the owner or operator knew
of, or was responsible for, the presence, release or disposal of
such substances as well as without regard to whether such
release or disposal was in compliance with law at the time it
occurred. Moreover, the imposition of such liability upon us
could be joint and several, which means we could be required to
pay for the cost of cleaning up contamination caused by others
who have become insolvent or otherwise judgment proof. We do not
believe that we have incurred such liabilities as would have a
material adverse effect on our business, financial condition and
results of operations.
</DIV>

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<B><I>Failure to comply with existing environmental laws could
harm our business and financial condition.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operations are subject to regulation under various federal,
state and local environmental laws, including those relating to:
the handling, storage, transportation, treatment and disposal of
medical waste products generated at our facilities;
identification and warning of the presence of
asbestos-containing materials in buildings, as well as removal
of such materials; the presence of other substances in the
indoor environment; and protection of the environment and
natural resources in connection with development or construction
of our properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of our facilities generate infectious or other hazardous
medical waste due to the illness or physical condition of the
residents, including, for example, blood-soaked bandages, swabs
and other medical waste products and incontinence products of
those residents diagnosed with an infectious disease. The
management of infectious medical waste, including its handling,
storage, transportation, treatment and disposal, is subject to
regulation under various federal, state and local environmental
laws. These environmental laws set forth the management
requirements for such waste, as well as related permit,
record-keeping, notice and reporting obligations. Each of our
facilities has an agreement with a waste management company for
the proper disposal of all infectious medical waste. The use of
such waste management companies does not immunize us from
alleged violations of such medical waste laws for operations for
which we are responsible even if carried out by such waste
management companies, nor does it immunize us from third-party
claims for the cost to cleanup disposal sites at which such
wastes have been disposed. Any finding that we are not in
compliance with environmental laws could adversely affect our
business operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Federal regulations require building owners and those exercising
control over a building&#146;s management to identify and warn,
via signs and labels, their employees and certain other
employers operating in the building of potential hazards posed
by workplace exposure to installed asbestos-containing materials
and potential asbestos-containing materials in their buildings.
The regulations also set forth employee training, record-keeping
requirements and sampling protocols pertaining to
asbestos-containing materials and potential asbestos-containing
materials. Significant fines can be assessed for violation of
these regulations. Building owners and those exercising control
over a building&#146;s management may be subject to an increased
risk of personal injury lawsuits by workers and others exposed
to asbestos-containing materials and potential
asbestos-containing materials. The regulations may affect the
value of a building containing asbestos-containing materials and
</DIV>

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potential asbestos-containing materials in which we have
invested. Federal, state and local laws and regulations also
govern the removal, encapsulation, disturbance, handling and/or
disposal of asbestos-containing materials and potential
asbestos-containing materials when such materials are in poor
condition or in the event of construction, remodeling,
renovation or demolition of a building. Such laws may impose
liability for improper handling or a release to the environment
of asbestos-containing materials and potential
asbestos-containing materials and may provide for fines to, and
for third parties to seek recovery from, owners or operators of
real properties for personal injury or improper work exposure
associated with asbestos-containing materials and potential
asbestos-containing materials.
</DIV>

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The presence of mold, lead-based paint, contaminants in drinking
water, radon and/or other substances at any of the facilities we
own or may acquire may lead to the incurrence of costs for
remediation, mitigation or the implementation of an operations
and maintenance plan. Furthermore, the presence of mold,
lead-based paint, contaminants in drinking water, radon and/or
other substances at any of the facilities we own or may acquire
may present a risk that third parties will seek recovery from
the owners, operators or tenants of such properties for personal
injury or property damage. In some circumstances, areas affected
by mold may be unusable for periods of time for repairs, and
even after successful remediation, the known prior presence of
extensive mold could adversely affect the ability of a facility
to retain or attract residents and could adversely affect a
facility&#146;s market value.
</DIV>

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We believe that we are in material compliance with applicable
environmental laws.
</DIV>

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We are unable to predict the future course of federal, state and
local environmental regulation and legislation. Changes in the
environmental regulatory framework could have a material adverse
effect on our business. In addition, because environmental laws
vary from state to state, expansion of our operations to states
where we do not currently operate may subject us to additional
restrictions on the manner in which we operate our facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to Our Industry</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our business may be adversely affected by increasing
regulation and enforcement.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The regulatory environment surrounding the senior living
industry continues to intensify in the amount and type of laws
and regulations affecting it. In addition, federal, state and
local officials are increasingly focusing their efforts on
enforcement of these laws. This is particularly true for large
for-profit, multi-facility providers like us. Some of the laws
and regulations that impact our industry include: state and
local laws impacting licensure, protecting consumers against
deceptive practices, and generally affecting the
facilities&#146; management of property and equipment and how we
otherwise conduct our operations, such as fire, health and
safety laws and regulations and privacy laws; federal and state
laws designed to protect Medicare and Medicaid, which mandate
what are allowable costs, pricing, quality of services, quality
of care, food service, resident rights (including abuse and
neglect) and fraud; federal and state residents&#146; rights
statutes and regulations; federal and state laws as to referral
payments and self-referrals, and Anti-Kickback and physicians
self-referral (&#147;Stark&#148;) laws; and safety and health
standards set by the Occupational Safety and Health
Administration. We are unable to predict the future course of
federal, state and local legislation or regulation. Changes in
the regulatory framework could have a material adverse effect on
our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many senior living facilities are also subject to regulation and
licensing by state and local health and social service agencies
and other regulatory authorities. Although requirements vary
from state to state, these requirements generally address:
personnel education, training and records; facility services,
including administration of medication, assistance with
self-administration of medication and the provision of nursing
services; staffing levels; monitoring of resident wellness;
physical plant specifications; furnishing of resident units;
food and housekeeping services; emergency evacuation plans;
professional licensing and certification of staff prior to
beginning employment; and resident
</DIV>

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<DIV align="left" style="font-size: 10pt;">
rights and responsibilities, including in some states the right
to receive health care services from providers of a
resident&#146;s choice that are not our employees. In several of
the states in which we operate or may operate, we are prohibited
from providing certain higher levels of senior care services
without first obtaining the appropriate licenses. In addition,
in several of the states in which we operate or intend to
operate, assisted living facilities and skilled nursing
facilities require a certificate of need before the facility can
be opened or the services at an existing facility can be
expanded. In most states, senior living facilities also are
subject to state or local building, zoning, fire and food
service codes and must be in compliance with these local codes
before licensing or certification may be granted. These laws and
regulatory requirements could affect our ability to expand into
new markets and to expand our services and facilities in
existing markets. In addition, if any of our presently licensed
facilities operates outside of its licensing authority, it may
be subject to penalties, including closure of the facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The intensified regulatory and enforcement environment impacts
providers like us because of the increase in the number of
inspections or surveys by governmental authorities and
consequent citations for failure to comply with regulatory
requirements. Unannounced surveys or inspections may occur
annually or bi-annually, or following a state&#146;s receipt of
a complaint about the facility. From time to time in the
ordinary course of business, we receive deficiency reports from
state regulatory bodies resulting from such inspections or
surveys. Most inspection deficiencies are resolved through an
agreed-to plan of corrective action relating to the
facility&#146;s operations, but the reviewing agency typically
has the authority to take further action against a licensed or
certified facility, which could result in the imposition of
fines, imposition of a provisional or conditional license,
suspension or revocation of a license, suspension or denial of
admissions, loss of certification as a provider under federal
health care programs or imposition of other sanctions, including
criminal penalties. Loss, suspension or modification of a
license may also cause us to default under our leases and/ or
trigger cross-defaults. Sanctions are taken against providers or
facilities without regard to the providers&#146; or
facilities&#146; history of compliance. We may also expend
considerable resources to respond to federal and state
investigations or other enforcement action under applicable laws
or regulations. To date, none of the deficiency reports received
by us has resulted in a suspension, fine or other disposition
that has had a material adverse effect on our revenues. However,
any future substantial failure to comply with any applicable
legal and regulatory requirements could result in a material
adverse effect to our business as a whole. In addition, state
Attorney Generals vigorously enforce consumer protection laws as
those laws relate to the senior living industry. State Medicaid
Fraud and Abuse Units investigate assisted living facilities
even if the facility or any of its residents do not receive
federal or state funds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Regulation of the senior living industry is evolving because of
the growing interests of a variety of advocacy organizations and
political movements attempting to standardize regulations for
certain segments of the industry, specifically assisted living.
Our operations could suffer if future regulatory developments,
such as federal assisted living laws and regulations, as well as
mandatory increases in the scope and severity of deficiencies
determined by survey or inspection officials, increase the
number of citations that can result in civil or criminal
penalties. Current laws and regulations allow enforcement
officials to make determinations on whether the care provided by
one or more of our facilities exceeds the level of care for
which the facility is licensed. A facility found delivering care
beyond its license might result in the immediate transfer and
discharge of residents, which creates market instability for a
provider having several facilities in the region. Furthermore,
many state regulations allow citations in one facility to impact
other facilities in the state in the effort to
&#147;control&#148; the big for-profit providers. Revocation of
a license at a given facility could therefore impact our ability
to obtain new licenses or to renew existing licenses at other
facilities, which may also cause us to be in default under our
leases and trigger cross-defaults or may also trigger defaults
under certain of our credit agreements, or adversely affect our
ability to obtain financing in the future. If a state were to
find that one facility&#146;s citation will impact another of
our facilities, this will also increase costs and result in
increased surveillance by the state survey agency. If regulatory
requirements increase, whether through enactment of new laws or
regulations or changes in the enforcement of
</DIV>

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<DIV align="left" style="font-size: 10pt;">
existing rules including increased enforcement brought about by
advocacy groups, in addition to federal and state regulators,
our operations could be adversely affected. In addition, any
adverse finding by survey and inspection officials may serve as
the basis for false claims lawsuits by private plaintiffs and
may lead to investigations under Anti-Kickback or Stark laws,
which may result in civil or criminal penalties against the
facility or individual.
</DIV>

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There are various extremely complex federal and state laws
governing a wide array of referrals, relationships and
arrangements and prohibiting fraud by health care providers,
including those in the senior living industry, and governmental
agencies are devoting increasing attention and resources to such
anti-fraud initiatives. The Health Insurance Portability and
Accountability Act of 1996, or HIPAA, and the Balanced Budget
Act of 1997 expanded the penalties for health care fraud. In
addition, with respect to our participation in federal health
care reimbursement programs, the government or private
individuals acting on behalf of the government may bring an
action under the False Claims Act alleging that a health care
provider has defrauded the government and seek treble damages
for false claims and the payment of additional monetary civil
penalties. Recently, other health care providers have faced
enforcement action under the False Claims Act. The False Claims
Act allows a private individual with knowledge of fraud to bring
a claim on behalf of the federal government and earn a
percentage of the federal government&#146;s recovery. Because of
these incentives, so-called &#147;whistleblower&#148; suits have
become more frequent. Also, if any of our facilities exceeds its
level of care, we may be subject to private lawsuits alleging
&#147;transfer trauma&#148; by residents. Such allegations could
also lead to investigations by enforcement officials, which
could result in penalties, including the closure of facilities.
The violation of any of these regulations may result in the
imposition of fines or other penalties that could jeopardize our
business.
</DIV>

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Additionally, in several states, we operate facilities that
participate in federal and/or state health care reimbursement
programs, including state Medicaid waiver programs for assisted
living facilities and the Medicare skilled nursing facility
benefit program, or other federal and/or state health care
programs. Consequently, we are subject to federal and state laws
that prohibit anyone from presenting, or causing to be
presented, claims for reimbursement which are false, fraudulent
or are for items or services that were not provided as claimed.
Violation of any of these laws can result in loss of licensure,
civil or criminal penalties and exclusion of health care
providers or suppliers from furnishing covered items or services
to beneficiaries of the applicable federal and/or state health
care reimbursement program. Loss of licensure may also cause us
to default under our leases and/or trigger cross-defaults.
Similar state laws vary from state to state, are sometimes vague
and have rarely been interpreted by courts or regulatory
agencies. We cannot be sure that these laws will be interpreted
consistently or in keeping with past practices.
</DIV>

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We are also subject to certain federal and state laws that
regulate financial arrangements by health care providers, such
as the Federal Anti-Kickback Law. This law makes it unlawful for
any person to offer or pay (or to solicit or receive) &#147;any
remuneration ... directly or indirectly, overtly or covertly, in
cash or in kind&#148; for referring or recommending for purchase
any item or service which is eligible for payment under the
Medicare and/or Medicaid programs. Authorities have interpreted
this statute very broadly to apply to many practices and
relationships between health care providers and sources of
patient referral. If a health care provider were to violate the
Anti-Kickback Law, it may face criminal penalties and civil
sanctions, including fines and possible exclusion from
government programs such as Medicare and Medicaid, which may
also cause us to default under our leases and/or trigger
cross-defaults. Adverse consequences may also result if we
violate federal Stark laws related to Medicare and Medicaid
physician self-referrals. While we endeavor to comply with all
laws that regulate the licensure and operation of our senior
living communities, it is difficult to predict how our revenues
could be affected if we were subject to an action alleging such
violations.
</DIV>

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We are also subject to federal and state laws designed to
protect the confidentiality of patient health information. The
U.S.&nbsp;Department of Health and Human Services, or HHS, has
issued rules pursuant to HIPAA relating to the privacy of such
information. Rules that became effective April&nbsp;14, 2003
govern our use and disclosure of health information at certain
HIPAA covered facilities. We
</DIV>

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established procedures to comply with HIPAA privacy requirements
at these facilities. The HIPAA rule establishing administrative,
physical and technical security standards for health information
became effective in April 2005. To the best of our knowledge, we
are in compliance with this rule. Although both current and
pending HIPAA requirements affect the manner in which we handle
health data and communicate with payors at covered facilities,
we believe that the cost of compliance will not have a material
adverse effect on our business, financial condition or results
of operations.
</DIV>

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<B><I>Compliance with the Americans with Disabilities Act, Fair
Housing Act and fire, safety and other regulations may require
us to make unintended expenditures which could adversely affect
our results of operations or financial condition and our ability
to pay dividends to stockholders.</I></B>
</DIV>

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All of our facilities are required to comply with the Americans
with Disabilities Act, or ADA. The ADA has separate compliance
requirements for &#147;public accommodations&#148; and
&#147;commercial properties,&#148; but generally requires that
buildings be made accessible to people with disabilities.
Compliance with ADA requirements could require removal of access
barriers and non-compliance could result in imposition of
government fines or an award of damages to private litigants.
</DIV>

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In addition, we are required to operate our facilities in
compliance with applicable fire and safety regulations, building
codes and other land use regulations and food licensing or
certification requirements as they may be adopted by
governmental agencies and bodies from time to time. Like other
health care facilities, senior living facilities are subject to
periodic survey or inspection by governmental authorities to
assess and assure compliance with regulatory requirements.
Surveys occur on a regular (often annual or bi-annual) schedule,
and special surveys may result from a specific complaint filed
by a resident, a family member or one of our competitors. We may
be required to make substantial capital expenditures to comply
with those requirements, and these expenditures could adversely
affect our results of operations or financial condition and our
ability to pay dividends to stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We must also comply with the Fair Housing Act, whereby we will
not discriminate in any of our practices that would cause
individuals to face barriers in gaining residency in any of our
facilities. Additionally, the Fair Housing Act and other state
laws require that we advertise our services in such a way that
we promote diversity and not limit it. We may be required to
change our marketing techniques to comply with these
requirements. These expenditures could adversely affect our
operations or financial condition as discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Significant legal actions and liability claims against us
in excess of insurance limits could subject us to increased
operating costs and substantial uninsured liabilities, which may
adversely affect our financial condition and operating
results.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior living business entails an inherent risk of
liability, particularly given our residents&#146; demographics,
including age and health, and the services we provide. In recent
years, we, as well as other participants in our industry, have
been subject to an increasing number of claims and lawsuits
alleging that our services have resulted in resident injury or
other adverse effects. Many of these lawsuits involve large
damage claims and significant legal costs. Many states continue
to consider tort reform and how it will apply to the senior
living industry. We may continue to be faced with the threat of
large jury verdicts in jurisdictions that do not find favor with
large senior living providers. We maintain liability insurance
policies in amounts and with the coverage and deductibles we
believe are adequate based on the nature and risks of our
business, historical experience and industry standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently maintain the following liability insurance: a
$25.0&nbsp;million primary limit of general and healthcare
professional liability insurance coverage, inclusive of at least
a $15.0&nbsp;million sub-limit of healthcare professional
liability ($25.0&nbsp;million sub-limit for designated
locations). This insurance coverage is on a per claim and
aggregate basis with a self-insured retention of
$1.0&nbsp;million. The
</DIV>

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<DIV align="left" style="font-size: 10pt;">
general and professional liability coverage is arranged on a
three-year, shared-limit basis, with a pre-negotiated
reinstatement of limit provision that will allow for the
re-purchase of the lead $15.0&nbsp;million of general and
professional liability coverage, at a set additional premium,
should adverse claims experience be realized during the policy
term. In addition to this $25.0&nbsp;million primary limit, we
have arranged $25.0&nbsp;million excess general liability-only
insurance coverage on a per claim and aggregate basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, we maintain primary workers&#146; compensation
insurance, which includes a $0.5&nbsp;million deductible per
occurrence, employer&#146;s liability and auto liability
insurance in compliance with statutory limits and requirements
and a $20.0&nbsp;million excess auto liability and
employer&#146;s liability coverage, over a primary auto and
employer&#146;s liability $1.0&nbsp;million policy limit, on a
per-occurrence, annual aggregate basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also currently maintain the following property insurance: a
$300.0&nbsp;million per-occurrence primary policy limit, which
contains various sub-limits of coverage, most notably for the
perils of flood and earthquake, limited to $50.0&nbsp;million on
a per-occurrence and annual aggregate basis. Terrorism coverage
is provided for other than the peril of earthquake to the noted
policy limits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a successful claim is made against us and it is not covered
by our insurance or exceeds the policy limits, our financial
condition and results of operations could be materially and
adversely affected. In some states, state law may prohibit or
limit insurance coverage for the risk of punitive damages
arising from professional liability and general liability claims
and/or litigation. As a result, we may be liable for punitive
damage awards in these states that either are not covered or are
in excess of our insurance policy limits. Also, the above
deductibles, or self-insured retention, are accrued based on an
actuarial projection of future liabilities. If this projection
is inaccurate and if there are an unexpectedly large number of
successful claims that result in liabilities in excess of our
self-insured retention, our operating results could be
negatively affected. Claims against us, regardless of their
merit or eventual outcome, also could have a material adverse
effect on our ability to attract residents or expand our
business and could require our management to devote time to
matters unrelated to the day-to-day operation of our business.
We also have to renew our policies every year and negotiate
acceptable terms for coverage, exposing us to the volatility of
the insurance markets, including the possibility of rate
increases. There can be no assurance that we will be able to
obtain liability insurance in the future or, if available, that
such coverage will be available on acceptable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Overbuilding, increased competition and increased
operating costs may adversely affect our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior living industry is highly competitive, and we expect
that it may become more competitive in the future. We compete
with numerous other companies that provide long-term care
alternatives such as home healthcare agencies, life care at
home, facility-based service programs, retirement communities,
convalescent centers and other independent living, assisted
living and skilled nursing providers, including not-for-profit
entities. In general, regulatory and other barriers to
competitive entry in the independent living and assisted living
segments of the senior living industry are not substantial,
except in the skilled nursing segment. We have experienced and
expect to continue to experience increased competition in our
efforts to acquire and operate senior living facilities.
Consequently, we may encounter increased competition that could
limit our ability to attract new residents, raise resident fees
or expand our business, which could have a material adverse
effect on our revenues and earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, recent overbuilding in the senior living industry
has reduced the occupancy rates of newly constructed buildings
and, in some cases, reduced the monthly rate that many newly
built and previously existing facilities are able to obtain for
their services. This has resulted in lower revenues for certain
of our facilities over the past several years. While we believe
that overbuilt markets should
</DIV>

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<DIV align="left" style="font-size: 10pt;">
be stabilized for the immediate future, we cannot be certain
that we will be able to achieve occupancy and rate levels that
will sustain our revenue growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to Our Organization and Structure</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>If the ownership of our common stock continues to be
highly concentrated, it may prevent you and other stockholders
from influencing significant corporate decisions and may result
in conflicts of interest.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following the completion of this offering, entities affiliated
with Fortress will beneficially own 43,157,000&nbsp;shares, or
over 60%, of our common stock. As a result, Fortress will be
able to control fundamental and significant corporate matters
and transactions, including: the election of directors; mergers,
consolidations or acquisitions; the sale of all or substantially
all of our assets and other decisions affecting our capital
structure; the amendment of our amended and restated certificate
of incorporation and amended and restated by-laws; and the
dissolution of the Company. Fortress&#146; interests may
conflict with your interests. Their control of the Company could
delay, deter or prevent acts that may be favored by our other
stockholders such as hostile takeovers, changes in control of
the Company and changes in management. See &#147;Certain
Relationships and Related Party Transactions&nbsp;&#151;
Agreements With Stockholders.&#148; As a result of such actions,
the market price of our common stock could decline or
stockholders might not receive a premium for their shares in
connection with a change of control of the Company. See
&#147;Description of Capital Stock&nbsp;&#151; Anti-Takeover
Effects of Delaware Law, Our Amended and Restated Certificate of
Incorporation and Our Amended and Restated By-Laws.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Anti-takeover provisions in our amended and restated
certificate of incorporation and our amended and restated
by-laws could have effects that conflict with the interests of
our stockholders.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain provisions of our amended and restated certificate of
incorporation and our amended and restated by-laws may
discourage, delay or prevent a merger or acquisition that you
may consider favorable or prevent the removal of our current
board of directors and management. We have a number of
anti-takeover devices in place that will hinder takeover
attempts, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a staggered board of directors consisting of three classes of
    directors, each of whom serve three-year terms;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    removal of directors only for cause, by 50.1% of the voting
    interest of stockholders entitled to vote;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    blank-check preferred stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    provisions in our amended and restated certificate of
    incorporation and amended and restated by-laws preventing
    stockholders from calling special meetings (with the exception
    of Fortress and its affiliates, so long as they collectively
    beneficially own at least 50.1% of our issued and outstanding
    common stock);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    advance notice requirements for stockholders with respect to
    director nominations and actions to be taken at annual
    meetings;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    no provision in our amended and restated certificate of
    incorporation for cumulative voting in the election of
    directors, which means that the holders of a majority of the
    outstanding shares of our common stock can elect all the
    directors standing for election.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, our amended and restated certificate of
incorporation provides that Section&nbsp;203 of the Delaware
General Corporation Law, which restricts certain business
combinations with interested stockholders in certain situations,
will not apply to us. This may make it easier for a third party
to acquire an interest in some or all of us with Fortress&#146;
approval, even though our other stockholders may not deem such
an acquisition beneficial to their interests.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
See &#147;Description of Capital Stock&nbsp;&#151; Anti-Takeover
Effects of Delaware Law, Our Amended and Restated Certificate of
Incorporation and Our Amended and Restated By-Laws.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>We are a holding company with no operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a holding company with no material direct operations. Our
principal assets are the equity interests we directly or
indirectly hold in our operating subsidiaries. As a result, we
are dependent on loans, dividends and other payments from our
subsidiaries to generate the funds necessary to meet our
financial obligations. Our subsidiaries are legally distinct
from us and have no obligation to make funds available to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Risks Related to This Offering</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>An active market for our shares of common stock may never
develop.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
common stock. We plan to submit an application to have our
common stock approved for quotation on New York Stock Exchange
under the symbol &#147;BKD.&#148; However, we cannot assure you
that regular trading of shares of our common stock will develop
on that exchange or elsewhere or, if developed, that any market
will be active or sustained. Accordingly, we cannot assure you
of the liquidity of any such market, your ability to sell your
shares of common stock or the prices that you may obtain for
your shares of common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>The market price and trading volume of our common stock
may be volatile, which could result in rapid and substantial
losses for our stockholders.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Even if an active trading market develops, the market price of
our common stock may be highly volatile and could be subject to
wide fluctuations. In addition, the trading volume in our common
stock may fluctuate and cause significant price variations to
occur. If the market price of our common stock declines
significantly, you may be unable to resell your shares at or
above your purchase price. We cannot assure you that the market
price of our common stock will not fluctuate or decline
significantly in the future. Some of the factors that could
negatively affect our share price or result in fluctuations in
the price or trading volume of our common stock include:
</DIV>

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    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    variations in our quarterly operating results;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in our earnings estimates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the contents of published research reports about us or the
    senior living industry or the failure of securities analysts to
    cover our common stock after this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    additions or departures of key management personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any increased indebtedness we may incur or lease obligations we
    may enter into in the future;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    actions by institutional stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in market valuations of similar companies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    announcements by us or our competitors of significant contracts,
    acquisitions, strategic partnerships, joint ventures or capital
    commitments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    speculation or reports by the press or investment community with
    respect to the Company or the senior living industry in general;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    increases in market interest rates that may lead purchasers of
    our shares to demand a higher yield;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes or proposed changes in laws or regulations affecting the
    senior living industry or enforcement of these laws and
    regulations, or announcements relating to these matters;&nbsp;and</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    general market and economic conditions.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Future offerings of debt or equity securities by us may
adversely affect the market price of our common stock.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the future, we may attempt to increase our capital resources
by offering debt or additional equity securities, including
commercial paper, medium-term notes, senior or subordinated
notes, series of preferred shares or shares of our common stock.
Upon liquidation, holders of our debt securities and preferred
shares, and lenders with respect to other borrowings, would
receive a distribution of our available assets prior to the
holders of our common stock. Additional equity offerings may
dilute the economic and voting rights of our existing
stockholders or reduce the market price of our common stock, or
both. Preferred shares, if issued, could have a preference with
respect to liquidating distributions or a preference with
respect to dividend payments that could limit our ability to pay
dividends to the holders of our common stock. Because our
decision to issue securities in any future offering will depend
on market conditions and other factors beyond our control, we
cannot predict or estimate the amount, timing or nature of our
future offerings. Thus, holders of our common stock bear the
risk of our future offerings reducing the market price of our
common stock and diluting their share holdings in us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After this offering, assuming the exercise in full by the
underwriters of their over allotment option, we will have an
aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock authorized but unissued and not reserved for
issuance under our option plans. We may issue all of these
shares without any action or approval by our stockholders. We
intend to continue to actively pursue acquisitions of senior
living facilities and may issue shares of common stock in
connection with these acquisitions. Any shares issued in
connection with our acquisitions, the exercise of outstanding
stock options or otherwise would dilute the holdings of the
investors who purchase our shares in this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>The market price of our common stock could be negatively
affected by sales of substantial amounts of our common stock in
the public markets.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After this offering, there will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding. There will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
outstanding if the underwriters exercise their over allotment
option in full. All the shares of our common stock sold in this
offering will be freely transferable, except for any shares held
by our &#147;affiliates,&#148; as that term is defined in
Rule&nbsp;144 under the Securities Act of 1933, as amended, or
the Securities Act. See &#147;Shares Eligible For Future
Sale.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to our Stockholders Agreement, Fortress and Health
Partners, and certain of their related partnerships and
permitted third-party transferees have the right, in certain
circumstances, to require us to register their shares of our
common stock under the Securities Act for sale into the public
markets. Upon the effectiveness of such a registration
statement, all shares covered by the registration statement will
be freely transferable. In addition, in the event that Emeritus
and NW Select are unable to sell all of the shares of our common
stock offered by them in this offering, we have agreed to enter
into a registration rights agreement with them immediately after
the consummation of this offering. See &#147;Certain
Relationships and Related Party Transactions&nbsp;&#151;
Agreements With Stockholders.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and our executive officers, directors and stockholders
holding &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
or more of our outstanding common stock have agreed with the
underwriters that, subject to limited exceptions, for a period
of 120&nbsp;days after the date of this prospectus, we and they
will not directly or indirectly offer, pledge, sell, contract to
sell, sell any option or contract to purchase or otherwise
dispose of any shares of our common stock, or any securities
convertible into or exercisable or exchangeable for shares of
our common stock, or in any manner transfer all or a portion of
the economic consequences associated with the ownership of
shares of our common stock, or cause a registration statement
covering any shares of our common stock to be filed, without the
prior written consent of the representatives. The
representatives may waive these restrictions in their discretion.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, following the completion of this offering, we
intend to file a registration statement on Form&nbsp;S-8 under
the Securities Act to register an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock reserved for issuance under our stock
incentive programs. Subject to any restrictions imposed on the
shares and options granted under our stock incentive programs,
shares registered under the registration statement on
Form&nbsp;S-8 will be available for sale into the public
markets, subject to the 120-day lock-up agreements described
above. All participants in the directed shares program described
under &#147;Underwriting&#148; have also agreed to similar
restrictions on the ability to sell their common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Investors in this offering will suffer immediate and
substantial dilution.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The initial public offering price of our common stock is
substantially higher than the net tangible book value per share
of our common stock outstanding immediately after this offering.
Our net tangible book value per share as of March&nbsp;31, 2005
was approximately $187.48. Our net tangible book value per share
as of March&nbsp;31, 2005 represents our total assets minus
intangible assets, deferred finance costs and total liabilities
less deferred gains, divided by the 1,001,000&nbsp;shares of our
common stock that were outstanding on March&nbsp;31, 2005.
Investors who purchase our common stock in this offering will
pay a price per share that substantially exceeds the net
tangible book value per share of our common stock. If you
purchase our common stock in this offering, you will experience
immediate and substantial dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in
the net tangible book value per share of our common stock, based
upon the initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which represents the mid-point of the range set forth on
the cover page of this prospectus. Investors who purchase our
common stock in this offering will have
purchased &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the shares
outstanding immediately after the offering, but will have
paid &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the total consideration
for those shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Market interest rates may have an effect on the value of
our common stock.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
One of the factors that investors may consider in deciding
whether to buy or sell our common stock is our dividend payment
per share as a percentage of our share price relative to market
interest rates. If market interest rates increase, prospective
investors may desire a higher rate of return on our common stock
and seek securities paying higher dividends or interest or
offering a higher rate of return. As a result, interest rate
fluctuations and capital market conditions can affect the demand
for and market value of our common stock. For instance, if
interest rates rise, it is likely that the market price of our
common stock will decrease, because current stockholders and
potential investors will likely require a higher dividend yield
and rate of return on our common stock as interest-bearing
securities, such as bonds, offer more attractive returns.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='103'></A>
</DIV>

<!-- link1 "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SPECIAL NOTE&nbsp;REGARDING FORWARD-LOOKING STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of the statements under &#147;Prospectus Summary,&#148;
&#147;Risk Factors,&#148; &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations,&#148;
&#147;Business&#148; and elsewhere in this prospectus may
contain forward-looking statements which reflect our current
views with respect to, among other things, future events and
financial performance. You can identify these forward-looking
statements by the use of forward-looking words such as
&#147;outlook,&#148; &#147;believes,&#148; &#147;expects,&#148;
&#147;potential,&#148; &#147;continues,&#148; &#147;may,&#148;
&#147;will,&#148; &#147;should,&#148; &#147;seeks,&#148;
&#147;approximately,&#148; &#147;predicts,&#148;
&#147;intends,&#148; &#147;plans,&#148; &#147;estimates,&#148;
&#147;anticipates&#148; or the negative version of those words
or other comparable words. Any forward-looking statements
contained in this prospectus are based upon the historical
performance of our subsidiaries and on our current plans,
estimates and expectations. The inclusion of this
forward-looking information should not be regarded as a
representation by us, the underwriters or any other person that
the future plans, estimates or expectations contemplated by us
will be achieved. Such forward-looking statements are subject to
various risks and uncertainties. Accordingly, there are or will
be important factors that could cause our actual results to
differ materially from those indicated in these statements. We
believe that these factors include but are not limited to a
decrease in the overall demand for senior housing, general
economic conditions and economic conditions in the markets in
which we operate, real estate markets in the regions where our
facilities are located, acquisition risks, competitive pressures
within the industry and/or markets in which we operate, the
creditworthiness of our residents, interest rate fluctuations,
licensing risks, our failure to comply with federal, state and
local laws and regulations, our failure to comply with
environmental laws, the effect of future legislation or
regulatory changes in our operations, and other factors
described in the section entitled &#147;Risk Factors&#148;
beginning on page&nbsp;12 of this prospectus. These factors
should not be construed as exhaustive and should be read in
conjunction with the other cautionary statements that are
included in this prospectus. We do not undertake any obligation
to publicly update or review any forward-looking statement,
whether as a result of new information, future developments or
otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be
incorrect, actual results may vary materially from what we may
have projected. Any forward-looking statements you read in this
prospectus reflect our current views with respect to future
events and are subject to these and other risks, uncertainties
and assumptions relating to our operations, results of
operations, financial condition, growth strategy and liquidity.
You should specifically consider the factors identified in this
prospectus that could cause actual results to differ before
making an investment decision.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='104'></A>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>USE OF PROCEEDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The net proceeds to us from the sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock offered by the Company hereby are estimated to
be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
assuming an initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share (the midpoint of the price range set forth on the cover
page of this prospectus) and after deducting the estimated
underwriting discounts and commissions and offering expenses
payable by us. We expect to use the net proceeds for repayment
of certain of our outstanding indebtedness as described below,
acquisition of additional senior living operating companies and
facilities, including the acquisition of six facilities pursuant
to a purchase option as described below, and other general
corporate purposes. Pending these uses, we intend to invest the
net proceeds in short-term interest-bearing instruments or money
market accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to use approximately $9.7&nbsp;million of the net
proceeds from this offering towards the purchase price of
approximately $19.4&nbsp;million (net of a $1.0&nbsp;million
lease deposit and including closing costs) exercise our purchase
option with respect to six facilities that Alterra currently
leases from Omega Healthcare Investors, Inc. and certain of its
affiliates. We expect to raise an additional $10.0&nbsp;million
of debt to fund the remainder of the purchase price. Upon our
exercise of the purchase option, the leases and all other
related agreements effecting these properties will be terminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to use approximately $62.2&nbsp;million of the net
proceeds from this offering to repay the following indebtedness
and $2.2&nbsp;million of the following lessor advances:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Approximately $8.1&nbsp;million to repay in full the debt
    outstanding under a first mortgage loan encumbering our Westbury
    Care Center facility. The loan bears interest at the rate of
    prime plus 0.75% and is due March&nbsp;31, 2008. The loan can be
    prepaid without penalty.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Approximately $32.0&nbsp;million to repay the notes&nbsp;B
    portion of our $182.0&nbsp;million first mortgage loan entered
    into in March 2005 with Guaranty Bank, which is secured by five
    facilities located in Illinois, North Carolina, Missouri, Ohio
    and New York. BLC used the proceeds of the loan to refinance the
    existing indebtedness on these five facilities, including
    repayment in full of a first mortgage loan and a mezzanine loan
    encumbering The Hallmark at Battery Park City in the amount of
    $50.0&nbsp;million and $8.5&nbsp;million, respectively. The
    notes&nbsp;B can be prepaid, subject to a prepayment fee equal
    to 1% of the principal being repaid. The loan matures on
    April&nbsp;1, 2008, and may be extended for two additional
    one-year periods, subject to certain covenants. The
    $182.0&nbsp;million loan is allocated between
    $150.0&nbsp;million in notes&nbsp;A, which bear interest at
    LIBOR plus 3.05%, and $32.0&nbsp;million in notes&nbsp;B, which
    bear interest at LIBOR plus 5.60%. At the end of the 12th and
    24th&nbsp;calendar months, the notes&nbsp;B can be resized to
    notes&nbsp;A, in which case the notes&nbsp;A interest rate
    increases to LIBOR plus 3.10% and the notes&nbsp;B interest rate
    increases to LIBOR plus 6.60% and increases 1.00% annually
    thereafter.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Approximately $10.0&nbsp;million to repay in full our term loan
    from LaSalle Bank National Association that is payable interest
    only monthly at the rate of prime plus 1.00% and the principal
    of which is due in quarterly installments of $0.5&nbsp;million
    commencing July&nbsp;1, 2005 until maturity on March&nbsp;31,
    2007. The loan can be prepaid without penalty.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Approximately $2.9&nbsp;million to repay in full the debt
    outstanding related to taxable bonds encumbering four Alterra
    facilities located in Kansas. The bonds have an average interest
    rate of 7.36% and mature in 2009. The bonds may be prepaid
    without penalty.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Approximately $9.2&nbsp;million to repay unsecured notes that
    were issued in conjunction with Alterra&#146;s acquisition of
    joint venture partnership interests. The notes bear interest at
    9.00% and mature in December 2008. The notes may be prepaid
    without penalty, upon five days&#146; notice.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Approximately $2.2&nbsp;million to repay in full lessor advances
    to fund certain escrow deposits required pursuant to underlying
    loan agreements in connection with the Chambrel Portfolio, which
    amount can be repaid at any time during the term of the lease.
    The current lease rate on this amount is 15.86%.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will not receive any proceeds from the sale of
4,172,000&nbsp;shares of common stock offered hereby by the
selling stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='105'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIVIDEND POLICY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, we paid a dividend of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of our common stock, or an aggregate of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
We intend to continue to pay regular quarterly dividends to the
holders of our common stock. The payment of dividends is subject
to the discretion of our board of directors and will depend on
many factors, including our results of operations, financial
condition and capital requirements, earnings, general business
conditions, restrictions imposed by financing arrangements,
legal restrictions on the payment of dividends and other factors
the board of directors deems relevant. In addition, we are a
holding company with no direct operations and depend on loans,
dividends and other payments from our subsidiaries to generate
the funds necessary to pay dividends. We expect that in certain
quarters we may pay dividends that exceed our net income amounts
for such period as calculated in accordance with GAAP.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='106'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CAPITALIZATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our capitalization as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on an actual basis (after giving effect to the formation
    transactions described in &#147;Business&nbsp;&#151;
    History&#148;); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    on a pro forma basis to give effect to the sale of shares of our
    common stock in this offering at an assumed offering price
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    after deducting offering costs, underwriters&#146; discount and
    sale of common shares by minority stockholders, application of a
    portion of the proceeds from this offering towards repayment of
    certain outstanding indebtedness and exercise of our purchase
    option with respect to six facilities as described in &#147;Use
    of Proceeds,&#148; the formation transactions described in
    &#147;Business&nbsp;&#151; History&#148; and payment of a
    $20.0&nbsp;million dividend by Alterra.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This table contains unaudited information and should be read in
conjunction with &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations&#148; and our
combined financial statements and the accompanying notes that
appear elsewhere in this prospectus.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">As of &nbsp;, 2005</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Actual</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Dollars in thousands)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current portion of long-term debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capital lease obligation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Stockholders&#146; equity:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Preferred stock, $0.01&nbsp;par
    value: 50,000,000&nbsp;shares authorized; no shares issued and
    outstanding on an actual and pro forma as adjusted basis
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Common stock, $0.01 par value:
    200,000,000&nbsp;shares authorized on an actual basis and
    58,000,000&nbsp;shares issued and outstanding on an actual basis
    and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    issued and outstanding on a pro forma as adjusted basis
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated earnings (deficit)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated other comprehensive loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total capitalization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">32

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='107'></A>
</DIV>

<!-- link1 "DILUTION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DILUTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share of our common stock and the pro forma
net tangible book value per share of our common stock after this
offering. Net tangible book value per share represents the
amount of book value of our total tangible assets less book
value of our total liabilities, excluding deferred gains,
divided by the number of shares of common stock then outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our net tangible book value as of March&nbsp;31, 2005 was
approximately $187.7&nbsp;million, or approximately $187.48 per
share based on the 1,001&nbsp;shares of common stock then
outstanding. After giving effect to our sale of common stock in
this offering at the initial public offering price
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share (the midpoint of the price range set forth on the cover
page of this prospectus), and after deducting estimated
underwriting discounts and estimated offering expenses, our pro
forma net tangible book value as of March&nbsp;31, 2005 would
have
been &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share (assuming no exercise of the underwriters&#146; option to
purchase additional shares). This represents an immediate and
substantial dilution
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors purchasing common stock in this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table illustrates this dilution on a per share
basis:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="77%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assumed initial public offering
    price per share
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Pro forma net tangible book value
    per share as of March&nbsp;31, 2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">187.48</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Decrease in pro forma net tangible
    book value per share attributable to this offering
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Pro forma net tangible book value
    per share after giving effect to this offering
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Dilution per share to new investors
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table summarizes, on a pro forma basis as of
March&nbsp;31, 2005, the total number of shares of common stock
purchased from us, the total consideration paid to us and the
average price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Shares Purchased</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Consideration</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Average Price</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Number</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Percent</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Percent</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Per Share</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B><FONT face="helvetica,arial">(in millions)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Existing stockholders
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">New investors
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100.0%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100.0%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Total consideration and average price paid by the new investors
in the table above give effect to the $20.0&nbsp;million cash
dividend paid by FEBC-ALT Investors LLC in June 2005 and the
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
dividend which we expect to pay prior to this offering.
</DIV>

<P align="center" style="font-size: 10pt;">33

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='108'></A>
</DIV>

<!-- link1 "SELECTED COMBINED HISTORICAL FINANCIAL AND OPERATING DATA" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SELECTED COMBINED HISTORICAL FINANCIAL AND OPERATING DATA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our selected historical combined
financial data as of and for each of the years in the five-year
period ended December&nbsp;31, 2004 and for the three months
ended March&nbsp;31, 2005 and 2004. The combined financial
statements includes Brookdale Living Communities, Inc. for all
periods presented and Alterra Healthcare Corporation effective
December&nbsp;1, 2003. You should read this information in
conjunction with the information under &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations,&#148; &#147;Business&#148; and our historical
combined financial statements and the related notes thereto
included elsewhere in this prospectus. Our historical statement
of operations data and balance sheet data as of and for each of
the years in the five-year period ended December&nbsp;31, 2004
have been derived from our audited financial statements. Our
historical combined financial statements as of March&nbsp;31,
2005 and 2004 and for each of the years in the three-year period
ended December&nbsp;31, 2004 have been included elsewhere in
this prospectus.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Period from</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Period from</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">September&nbsp;20,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">January&nbsp;1,</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2000</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2000</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">through</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">through</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">September&nbsp;19,</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2001</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2000</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2000</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Statement of Operations Data (in
    thousands, except per share data):</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,983</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">155,633</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">660,872</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">222,584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">161,516</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">123,935</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28,161</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86,930</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110,328</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,810</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">415,169</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">133,119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,980</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">72,467</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,692</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,904</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,502</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,825</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,744</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,003</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,016</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,742</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,923</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,597</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,708</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,230</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,904</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of Goodwill
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,382</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">595</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Merger Costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,410</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,433</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,239</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,640</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,540</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,138</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,880</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,156</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">173,859</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,471</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">611,113</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">202,340</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">150,231</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">124,233</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,155</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">85,297</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,124</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,162</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,759</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,244</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,285</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(298</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(994</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,633</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">362</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">224</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">637</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,251</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,962</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,346</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,899</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(18,167</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(63,634</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25,106</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,490</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,247</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,613</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,540</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in fair value of derivatives
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,062</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,832</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,176</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on sale of properties
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(24,513</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss (gain)&nbsp;on extinguishment
    of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(453</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,051</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,511</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in earnings (loss) of
    unconsolidated ventures, net of minority interest of $(7), $(6),
    $(6), $11, and&nbsp;&#151; , respectively
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(187</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(373</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(931</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">318</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">984</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(974</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,237</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,960</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,056</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,509</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,383</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,690</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">355</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,439</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Provision) benefit for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">713</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(139</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,503</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(448</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,150</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before discontinued
    operations and cumulative effect of a change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,403</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,247</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,167</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,648</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(93</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">289</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(820</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(722</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(643</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of a change in
    accounting principle, net of income taxes of $8,095
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(93</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">289</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Earnings (loss) per share:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Basic
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4.47</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21.87</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(196.42</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,187.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(93.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">289.00</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Diluted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4.47</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21.87</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(196.42</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,187.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(93.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">289.00</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">34

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Period from</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Period from</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">September&nbsp;20,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">January&nbsp;1,</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2000</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2000</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">through</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">through</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">September&nbsp;19,</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2001</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2000</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2000</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Weighted average shares outstanding:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Basic
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Diluted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Other Operating Data:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Number of facilities (at end of
    period)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">366</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">359</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">367</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">359</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">51</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total units operated
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,109</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,423</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,208</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,423</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,334</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,266</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,567</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Occupancy rate
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">87.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">91.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">82.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">78.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Average monthly revenue per unit
    (same&nbsp;store)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,880</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,815</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,827</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,660</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,516</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,445</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,361</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">As of March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B><FONT face="helvetica,arial">As of December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2001</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2000</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Combined Balance Sheet Data (in
    thousands):</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,083</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39,271</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86,858</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">56,468</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,172</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,067</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">440</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">729,420</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,580,959</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">746,625</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,656,582</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">730,298</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">570,323</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">531,742</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">383,275</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">999,914</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">371,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,044,736</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290,483</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">171,236</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">136,653</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,605</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">384,066</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">71,454</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">393,133</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">333,632</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">321,915</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">315,728</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Note&nbsp;&#151; On September&nbsp;19, 2000, BLC was acquired by
Fortress Brookdale Acquisition LLC and the purchase price was
pushed down to BLC&#146;s consolidated financial statements and
the historical cost adjusted to reflect fair value. Prior to
September&nbsp;19, 2000, BLC was a public company.
</DIV>

<P align="center" style="font-size: 10pt;">35

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='109'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following discussion should be read in conjunction with
our &#147;Selected Combined Historical Financial And Operating
Data&#148; and combined financial statements and related notes
appearing elsewhere in this prospectus. In addition to
historical information, this discussion contains forward-looking
statements that involve risks, uncertainties and assumptions
that could cause actual results to differ materially from
management&#146;s expectations. Please see &#147;Cautionary
Statement Regarding Forward-Looking Statements&#148; for more
information. Factors that could cause such differences include
those described in &#147;Risk Factors&#148; and elsewhere in
this prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are the third largest operator of senior living facilities in
the United States based on total capacity with over 380
facilities in 32&nbsp;states and the ability to serve over
30,000 residents. We offer our residents access to a full
continuum of services across all sectors of the senior living
industry. As of June&nbsp;30, 2005, we operated 81 independent
living facilities with 14,619&nbsp;units, 291 assisted living
facilities with 12,342 beds, eight continuing care retirement
communities, or CCRCs, with 3,238&nbsp;units/beds (including 825
resident-owned cottages on our CCRC campuses managed by us) and
one skilled nursing facility with 82&nbsp;units/beds. The
majority of our units/beds are located in campus settings or
facilities containing multiple services, including CCRCs. As of
June&nbsp;30, 2005, our facilities were on average&nbsp;88.1%
occupied. We generate over 98% of our revenues from private pay
customers, which limits our exposure to government reimbursement
risk. In addition, we control the operating economics of our
facilities through property ownership and long-term leases. We
believe we operate in the most attractive sectors of the senior
living industry with significant opportunities to increase our
revenues through providing a combination of housing, hospitality
services and health care services. For the three months ended
March&nbsp;31, 2005, 13.7% of our revenues were generated from
owned facilities, 85.8% from leased facilities and 0.5% from
management fees from facilities we operate on behalf of third
parties and affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were formed in June 2005 for the purpose of combining two
leading senior living operating companies, Brookdale Living
Communities, Inc., or BLC, and Alterra Healthcare Corporation,
or Alterra. BLC and Alterra have been operating independently
since 1986 and 1981, respectively. Since December 2003, BLC and
Alterra have been under the common control of Fortress.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We plan to grow our revenue and operating income through a
combination of: (i)&nbsp;organic growth in our existing
portfolio; (ii)&nbsp;acquisitions of additional operating
companies and facilities; and (iii)&nbsp;the realization of
economies of scale, including those created by the BLC and
Alterra combination. Given the size and breadth of our
nationwide platform, we believe that we are well positioned to
invest in a broad spectrum of assets in the senior living
industry. Since January 2001, we have begun leasing or acquired
the ownership or management of 52 senior living facilities with
approximately 11,000&nbsp;units/beds. In 2005, we acquired the
ownership or management of 16 senior living facilities with
4,266&nbsp;units/beds (including 825 resident-owned cottages on
our CCRC campuses managed by us) and an additional facility with
233&nbsp;units/beds, which is currently under contract for sale.
</DIV>

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Our senior living facilities offer residents a supportive
&#147;home-like&#148; setting, assistance with activities of
daily living, or ADLs, and, in a few facilities, licensed
skilled nursing services. By providing residents with a range of
service options as their needs change, we provide greater
continuity of care, enabling seniors to &#147;age-in-place&#148;
and thereby maintain residency with us for a longer period of
time. The ability of residents to age-in-place is also
beneficial to our residents and their families who are burdened
with care decisions for their elderly relatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our independent living facilities&#146; target residents are
senior citizens age&nbsp;70 and older who desire or need a more
supportive living environment. The average independent living
resident resides in an independent living facility for
30&nbsp;months. About half of our residents relocate to one of
</DIV>

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<DIV align="left" style="font-size: 10pt;">
our independent living facilities in order to be in a
metropolitan area that is closer to their adult children. Our
assisted living facilities&#146; target residents are
predominantly female senior citizens age&nbsp;85 and older who
require assistance with two or three ADLs. The average assisted
living resident resides in an assisted living facility for
21&nbsp;months. Residents typically enter an assisted living
facility due to a relatively immediate need for services that
might have been triggered by a medical event or need.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Overbuilding in the late 1990s in the senior living industry put
downward pressure on the occupancy rates and the resident fees
of senior living providers. The slowdown in construction and
lack of construction financing since 1999 has led to a reduction
in the supply of new units being constructed. Growing demand for
senior living services has resulted in a trend towards
increasing occupancy rates and resident fees for operators of
existing facilities.
</DIV>

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Growing consumer awareness among seniors and their families
concerning the types of services provided by independent and
assisted living operators has further contributed to the
opportunities in the senior living industry. Also, seniors
possess greater financial resources, which makes it more likely
that they are able to afford to live in market-rate senior
housing. Seniors in the geographic areas in which we operate
tend to have a significant amount of assets generated from
savings, pensions and, due to strong national housing markets,
the sale of private homes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Challenges in our industry include increased state and local
regulation of the assisted living industry, which has led to an
increase in the cost of doing business; the regulatory
environment continues to intensify in the amount and types of
laws and regulations affecting us, accompanied by an increase by
state and local officials in enforcement thereof. In addition,
like other companies, our financial results may be negatively
impacted by increasing employment costs including salaries,
wages and benefits, such as health care, for our employees.
Increases in the costs of utilities and real estate taxes will
also have a negative impact on our financial results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Formation Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a holding company formed in June 2005 for the purpose of
combining, through a series of mergers, two leading senior
living operating companies, BLC and Alterra. The combination of
these two companies created a nationwide operating platform to
grow our existing portfolio, realize economies of scale and add
to our existing portfolio through strategic acquisitions of
existing assets and/or senior living portfolios. In connection
with the combination of BLC and Alterra, we have negotiated new
contracts for food, insurance and other services and will reduce
the size of our corporate workforce through a consolidation of
corporate functions such as accounting, finance, human resources
and legal, which are collectively expected to result in
recurring operating and general and administrative expense
savings, net of additional recurring costs expected to be
incurred as a public company, of between approximately
$13.0&nbsp;million and $15.0&nbsp;million per year. We began to
realize these savings upon completion of the formation
transactions
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the combination of BLC and Alterra, Fortress sold
the Prudential Portfolio to Alterra in exchange for membership
interests in FEBC-ALT Investors LLC, or FEBC-ALT Investors, and
merged the Fortress CCRC Portfolio with and into a wholly-owned
subsidiary of the Company in exchange for shares of our common
stock. These portfolios together consist of 16 senior living
facilities with 4,266&nbsp;units, and an additional facility
with 233&nbsp;units/beds, which is currently under contract for
sale. Also, one facility with 189&nbsp;units/beds was sold on
July&nbsp;1, 2005 for $2.5&nbsp;million, the proceeds of which
were contributed to us in the series of formation transactions
described in &#147;Business&nbsp;&#151; History&#148; and will
be managed by an affiliate of BLC. All of the preceding were
purchased in the second and third quarter of 2005 by affiliates
of Fortress.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of these transactions we are the third largest
operator of senior living facilities in the United States.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We generate all of our revenues from resident fees and
management fees. For the three months ended March&nbsp;31, 2005
and the year ended December&nbsp;31, 2004, approximately 99.5%
of our revenues were generated from resident fees and
approximately 0.5% were generated from management fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Resident Fees.</I></B> We generate resident fee revenue on
a monthly basis from each resident in each facility that we own
and operate or lease and operate. The rates we charge are highly
dependent on local market conditions and the competitive
environment in which the facilities operate. Substantially all
of our independent and assisted living residency agreements
allow for adjustments in the monthly fee payable thereunder not
less frequently than 12 or 13&nbsp;months, or monthly,
respectively, thereby enabling us to seek increases in monthly
fees due to inflation, increased levels of care or other
factors. Any such pricing increase would be subject to market
and competitive conditions and could result in a decrease in
occupancy in the facilities. In addition, regulations governing
assisted living facilities in several states stipulate that each
resident must have the right to terminate the resident agreement
for any reason on reasonable notice. Consistent with these
regulations, a majority of our assisted living resident
agreements allow residents to terminate their agreements upon 0
to 30&nbsp;days&#146; notice. Our independent living facilities
generally allow residents to terminate their leases upon the
need for a higher level of care not provided at the facility or
death. Upon termination of a lease, the resident is usually
obligated to pay rent for the lesser of 60&nbsp;days after he or
she vacates the unit or until the unit is rented by another
resident.
</DIV>

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On average, for the three months ended March&nbsp;31, 2005, we
generated resident fees of approximately $2,880 per unit/bed per
month, or $34,560 per unit/bed on an annual basis, and for the
three months ended March&nbsp;31, 2004, we generated resident
fees of approximately $2,815 per unit/bed per month, or $33,780
per unit/bed on an annual basis. For the three months ended
March&nbsp;31, 2005 and March&nbsp;31, 2004, we generated
approximately $174.1&nbsp;million and $154.6&nbsp;million,
respectively, in resident fee revenue. For the years ended
December&nbsp;31, 2004 and December&nbsp;31, 2003, we generated
approximately $657.3&nbsp;million and $217.2&nbsp;million,
respectively, in resident fee revenue. The increases were
attributable to the inclusion of Alterra, effective
December&nbsp;1, 2003, the leasing of 15&nbsp;properties from
Ventas during the first half 2004, and improved operations at
our same store facilities.
</DIV>

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In three of our CCRC facilities, independent living residents
pay an entrance fee upon moving into the facility in addition to
a monthly fee. We have two types of entrance fee arrangements,
as described below.
</DIV>

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In two of our facilities, a portion of the fee is non-refundable
and a portion is refundable. The non-refundable portion of the
fee is initially recorded as deferred revenue and amortized to
revenue over the estimated stay of the resident in the facility.
The refundable portion of the fee is generally refundable upon
the resale of the unit, or in certain agreements upon resale of
a comparable unit or 12&nbsp;months after the resident vacates
the unit. Amounts payable from resale of the unit or a
comparable unit are classified as long-term obligations since
they do not require a use of our working capital. Based on
market conditions and resident preferences we periodically
review our entrance fee arrangements to determine the amount of
the fee and the allocation between the refundable and
non-refundable portions.
</DIV>

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In one facility the entrance fee is refundable to the resident
pro rata over a 67-month period. Accordingly, the fee is
amortized to revenue over 67&nbsp;months. If the resident
vacates the unit, the refundable portion is classified as a
current liability.
</DIV>

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We derive 98% of our resident fees from private pay sources. Our
resident fees are paid, on a monthly basis in advance, by
residents, their families, or other responsible parties,
typically out of personal income, assets or other savings. As a
result, economic downturns or changes in
</DIV>

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<DIV align="left" style="font-size: 10pt;">
demographics, among other things, could impact our ability to
charge and collect resident fees. Ancillary charges are billed
in arrears.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Management Fees.</I></B> Management fees are monthly fees
that we collect from owners of facilities for which we are the
manager. Management fees typically range from 2.8% to 5.0% of
the facility&#146;s total gross revenues. All management fees
are recognized as revenues when services are provided. For the
three months ended March&nbsp;31, 2005 and March&nbsp;31, 2004,
we earned approximately $0.9&nbsp;million and $1.1&nbsp;million,
respectively, in management fee revenue. For the years ended
December&nbsp;31, 2004 and December&nbsp;31, 2003, we earned
approximately $3.5&nbsp;million and $5.4&nbsp;million,
respectively, in management fee revenue. Management fee revenues
decreased primarily due to the lease of the 14 facilities from
Ventas during the quarter ended March&nbsp;31, 2004, that were
previously managed by us, offset by the additional nine
facilities for which we took over management in August and
December 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The terms of our management agreements generally range from one
to three years and can be cancelled by the property owners for
cause, sale of the facility or upon 30 to 60&nbsp;days&#146;
notice at renewal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Operating Expenses</B>
</DIV>

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We classify our operating expenses into the following
categories: (i)&nbsp;facility operating expenses, which include
labor, food, marketing and other direct facility expenses,
insurance and real estate taxes; (ii)&nbsp;general and
administrative expenses, which primarily include the cost to
staff and maintain our corporate headquarters and other overhead
costs; (iii)&nbsp;facility lease payments; and
(iv)&nbsp;depreciation and amortization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Alterra Reorganization</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the second half of 2000, two issues emerged that had a
materially adverse effect on Alterra&#146;s liquidity. First,
costs associated with operating Alterra&#146;s residences, labor
and liability insurance costs in particular, increased
significantly in the second half of 2000. Second, due both to a
generally unfavorable financing market for assisted living
residences and the declining credit fundamentals at both the
residence and corporate level, Alterra was unable to complete
its anticipated financing transactions in 2000 and 2001.
Throughout 2000 and 2001, Alterra sought to implement several
strategic initiatives designed to strengthen its balance sheet
and to enable management to focus on stabilizing and enhancing
its core business operations. The principal components of these
strategic initiatives included (i)&nbsp;discontinuing its
development activity; (ii)&nbsp;reducing its use of and reliance
upon joint venture arrangements; (iii)&nbsp;reducing the amount
of outstanding debt; and (iv)&nbsp;focusing on improving its
cash flow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;22, 2003, Alterra filed a voluntary petition
with the Bankruptcy Court to reorganize under Chapter&nbsp;11 of
the Bankruptcy Code. Alterra believed that its Chapter&nbsp;11
Filing was an appropriate and necessary step to conclude its
reorganization initiatives commenced in 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;26, 2003, the United States Bankruptcy Court
for the District of Delaware entered an order confirming
Alterra&#146;s Second Amended Plan of Reorganization, or the
Plan. Alterra executed an Agreement and Plan of Merger, or the
Merger Agreement, with FEBC-ALT Investors pursuant to which
FEBC-ALT Investors acquired 100% of the common stock of Alterra
upon emergence from the Chapter&nbsp;11 bankruptcy proceeding.
Pursuant to the Merger Agreement, FEBC-ALT Investors was
capitalized with $76.0&nbsp;million, including (i)&nbsp;a
$15.0&nbsp;million senior loan to FEBC-ALT Investors from an
affiliate of Fortress Investment Trust&nbsp;II, or FIT&nbsp;II,
a private equity fund, and (ii)&nbsp;$61.0&nbsp;million of
aggregate equity contributions. FIT&nbsp;II provided
approximately 75% of the equity investment to FEBC-ALT Investors
and was entitled to appoint a majority of the directors of
Alterra. Emeritus Corporation, or Emeritus and NW&nbsp;Select,
provided the remaining equity capital to FEBC-ALT Investors and
each was entitled to appoint one director. The merger
consideration was used to fund (i)&nbsp;costs of Alterra&#146;s
bankruptcy and reorganization and to provide for the working
capital and
</DIV>

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<DIV align="left" style="font-size: 10pt;">
other cash needs of Alterra and (ii)&nbsp;a distribution to the
unsecured creditors. In connection with the execution of the
Merger Agreement, Emeritus and FIT&nbsp;II delivered a Payment
Guaranty to Alterra pursuant to which Emeritus and FIT&nbsp;II
guaranteed up to $6.9&nbsp;million and $69.1&nbsp;million,
respectively, of the merger consideration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra emerged from bankruptcy on December&nbsp;4, 2003, which
we refer to as the Effective Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Merger Agreement, the maximum distribution to
holders of unsecured claims was approximately $23.0&nbsp;million
(which includes payments pursuant to settlement agreements with
holders of deficiency claims), which was to be adjusted pursuant
to the Merger Agreement based on working capital and the cash
requirements of the Plan through the Effective Date. Alterra has
distributed all of the approximately $23.0&nbsp;million. Certain
liabilities deemed subject to compromise were subsequently
repaid by Alterra, pursuant to the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The working capital settlement between Alterra and the committee
of unsecured creditors was finalized and approved by the
Bankruptcy Court on December&nbsp;29, 2004, for a total fixed
distributable amount of $2.5&nbsp;million. Through June&nbsp;30,
2005, $1.0&nbsp;million has been distributed. Payment of the
remaining distributable amount will be made when all unsecured
claims are determinable and liquidated, which is expected to
occur by the end of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On the Effective Date, Alterra adopted fresh start accounting
pursuant to the guidance provided by the American Institute of
Certified Public Accountant&#146;s Statement of Position
(SOP)&nbsp;90-7, <I>Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code. </I>For financial
reporting purposes, Alterra adopted the provisions of fresh
start accounting effective December&nbsp;1, 2003. In accordance
with the principles of fresh start accounting, Alterra adjusted
its assets and liabilities to their fair values as of
December&nbsp;1, 2003. Alterra&#146;s reorganization value was
determined to be equal to the cash amount paid for all of the
outstanding common stock of post-bankruptcy Alterra plus the
post-emergence liabilities existing at the reorganization date
of December&nbsp;4, 2003. To the extent the fair value of its
tangible and identifiable intangible assets, net of liabilities,
exceeded the reorganization value, the excess was recorded as a
reduction of the amount allocated to property, plant and
equipment and intangible assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Acquisitions and Dispositions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our financial results are impacted by the timing, size and
number of acquisitions, leases and sale-leasebacks we complete
in a period. Since January 2001, the number of facilities we
owned or leased increased by 39, which resulted in an increase
of approximately 8,300&nbsp;units/beds, for an aggregate
purchase price or lease value of approximately
$802.8&nbsp;million (including two facilities held for sale, one
of which was sold on July&nbsp;1, 2005 for $2.5&nbsp;million).
During this time period, we managed an additional 13 facilities
with approximately 2,700 units/beds for a total of 52 facilities
with approximately 11,000 units/beds that we began to own, lease
or manage since January 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the fourth quarter of 2004, we completed a sale-leaseback
with Provident Senior Living Trust, or Provident, whereby we
sold 68 facilities (which included 6,819&nbsp;units/beds) to
Provident for an aggregate sales price of $982.8&nbsp;million
and leased the facilities back through October&nbsp;31, 2019 and
December&nbsp;31, 2019 with extension rights at our option. On
June&nbsp;7, 2005, Ventas announced that it had completed the
acquisition of Provident pursuant to the terms of the Agreement
and Plan of Merger, dated as of April&nbsp;12, 2005, under which
Provident was merged with and into a wholly-owned subsidiary of
Ventas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the first quarter of 2004, the limited partnerships that
owned 14 facilities in which our subsidiaries had general and
limited partnership interests sold these facilities to
affiliates of Ventas for an aggregate sales price of
$114.6&nbsp;million. Ventas also acquired another facility from
a third party in a separate transaction. Simultaneously with
such sales, certain of our subsidiaries entered into
</DIV>

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<DIV align="left" style="font-size: 10pt;">
agreements to lease the 15 facilities (which included
2,215&nbsp;units/beds) from Ventas pursuant to either a master
lease or individual leases (collectively, the Ventas Leases).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;1, 2002, we leased seven facilities, which included
1,477&nbsp;units/beds, from an affiliate of Capstead Mortgage
Corporation, or Capstead, which at the time was an affiliate of
Fortress. In November 2002, Capstead sold one facility (which
contained 83&nbsp;units/beds) and adjusted the lease payment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Asset dispositions consist of assisted living facilities and
land parcels identified during Alterra&#146;s bankruptcy as
non-core assets that have been classified as held for sale. For
the years ended December&nbsp;31, 2004 and 2003, Alterra
disposed of 13 facilities and land parcels that included
790&nbsp;units/beds and nine facilities and land parcels that
included 551&nbsp;units/beds, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Financial Developments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following are certain changes in our financial results that
have occurred or that we expect to occur for the remainder of
2005 and beyond, as compared to our prior years&#146; results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;30, 2005, we refinanced the construction loans
secured by five facilities with new construction loans in the
aggregate amount of $182.0&nbsp;million, bearing interest at
30-day LIBOR plus 3.05% to 5.60% (weighted average&nbsp;3.50%),
payable in monthly installments of interest only through the
maturity of April&nbsp;1, 2008. The loans can be extended for
two additional one-year terms (subject to certain performance
covenants and payment of an annual extension fee of .25%). See
&#147;Description of Indebtedness&nbsp;&#151; Guaranty Bank
Mortgage Loan.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the funding of the loans, we entered into
interest rate swaps with a notional amount of
$182.0&nbsp;million to hedge the floating-rate debt payments,
for which we pay an average fixed rate of 4.64% and receive
30-day LIBOR from the counterparty. The interest rate swaps are
comprised of a $145.0&nbsp;million notional amount for seven
years and a $37.0&nbsp;million notional amount for three years.
In connection with the swaps we posted approximately
$2.3&nbsp;million as collateral with the counterparty and are
required to post additional collateral based on changes in the
fair value of the swaps. The swaps are recorded as cash flow
hedges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;28, 2005, we entered into a seven-year interest
rate swap with a notional amount of $70.0&nbsp;million to hedge
$72.2&nbsp;million of floating rate debt, pursuant to which we
pay a fixed rate of 4.70% and receive 30-day LIBOR from the
counterparty. The balance of the floating rate debt will be
hedged by a redesignation of the hedge of $2.2&nbsp;million
currently in place with respect to debt secured by the Fortress
CCRC Portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We plan to repay $62.2&nbsp;million and $2.2&nbsp;million of
indebtedness and temporary lessor advances, respectively, with a
portion of the proceeds of this offering. Offsetting this amount
is $10.0&nbsp;million of debt we expect to incur in connection
with the purchase of six facilities (which include
237&nbsp;units/beds) pursuant to a purchase option in our lease
with Omega Healthcare Investors, Inc. and certain of its
affiliates. See &#147;Use of Proceeds.&#148; The net effect of
these transactions will be to reduce our annual interest and
lease expense by $5.3&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a new public company, we will incur significant legal,
accounting and other expenses that we did not incur as a private
company related to corporate governance, Securities and Exchange
Commission, or SEC, reporting requirements under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, and
compliance with the various provisions of the Sarbanes-Oxley Act
of 2002. In particular, we expect to incur significant
incremental expenses associated with Sarbanes-Oxley
Section&nbsp;404 compliance documentation and remediation. In
addition, as a New York Stock Exchange-listed company, we are
required to establish an internal audit function, as a result of
which we will incur additional costs. We also expect these new
rules and regulations to make it more difficult and more
expensive for us to obtain director and officer liability
insurance, and we may be required to accept reduced coverage or
incur substantially higher costs to obtain coverage.
</DIV>

<P align="center" style="font-size: 10pt;">41

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are and will continue to be an acquisition-focused company.
As such, our financial results are impacted by our ability to
acquire existing senior living operating companies and
facilities. The primary factors affecting our determination of
the value of a facility for acquisition are its geographic
location, surrounding demographics, age and income of nearby
residents, occupancy, rental agreements, operating costs and
opportunities for improvements, financing alternatives
(including long-term and short-term financing) and leasing
alternatives. As we evaluate companies and/or facilities for
potential acquisition, we incur costs for various third
parties&#146; assistance, including in connection with due
diligence, negotiation and structuring of these acquisitions. If
an acquisition is abandoned, these costs are expensed. If the
acquisition is consummated, these costs are capitalized as part
of the total purchase price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Results of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Comparison of the Three Months Ended March&nbsp;31, 2005
to the Three Months Ended March&nbsp;31, 2004</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth, for the periods indicated,
statement of operations items and the amount and percentage of
increase or decrease of those items. The results of operations
for any particular period are not necessarily indicative of
results for any future period. The following data should be read
in conjunction with our combined financial statements and the
notes thereto, which are included herein ($ in 000&#146;s).
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Increase</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">% Increase</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Decrease)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Decrease)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT face="helvetica,arial">Statement of Operations
    Data:</FONT></I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">154,583</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,529</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">871</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,050</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(179</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,983</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">155,633</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,350</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110,328</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,810</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,518</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,502</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,825</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28,677</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">160.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,433</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,239</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,194</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,597</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,001</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(61.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">173,859</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,471</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,388</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,124</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,162</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,038</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(91.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">362</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">224</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">138</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">61.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,899</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(18,167</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,268</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">51.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in fair value of derivatives
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,062</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,832</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,894</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on extinguishment of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(453</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(453</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in earnings (loss) of
    unconsolidated ventures, net of minority interests of $7 and
    $(6), respectively
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(187</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(373</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">186</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(974</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">728</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">74.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss before income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,237</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,960</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,723</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Provision) benefit for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">713</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(879</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(123.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before discontinued
    operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,403</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,247</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,844</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(820</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">750</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">91.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,594</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">50.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">42

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Increase</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">% Increase</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Decrease)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Decrease)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT face="helvetica,arial">Selected Operating and Other
    Data:</FONT></I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Number of facilities (at end of
    period)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">366</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">359</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total units/beds operated(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,109</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,423</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,686</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Owned/leased facilities units/beds
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,541</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,318</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">223</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Owned/leased facilities occupancy
    rate:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Period end
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Weighted average
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Managed facilities units/beds
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,568</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,105</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,463</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">69.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Managed facilities period end
    occupancy rate(2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">82.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Average monthly revenue per
    unit/bed(3)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,880</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,815</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">65</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Total units/beds operated represent the total units/beds
    operated as of the end of the period. Occupancy rate is
    calculated by dividing total occupied units/beds by total
    units/beds operated as of the end of the period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes facilities managed by us but excludes Town Village
    Oklahoma City, which is currently in lease-up.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Average monthly revenue per unit/bed represents the average of
    the total monthly revenues divided by occupied units/beds at the
    end of the period averaged over the respective period presented
    and for the period of time in operation during the period for
    the same stores.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our total revenues increased primarily as a result of an
increase of $19.5&nbsp;million, or 12.6%, in resident fees, as
partially offset by a decrease in management fee revenue of
$0.2&nbsp;million, or 17.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Resident fee revenue.</I></B> Resident fees increased by
approximately $6.0&nbsp;million, or 4.1%, at the 328 facilities
we operated during both periods. The remaining increase in
resident fee revenue was primarily due to the lease up of five
facilities and a full three months of operations from the 14
facilities leased during the three months ended March&nbsp;31,
2005, pursuant to our lease agreements with Ventas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Management fee revenue.</I></B> Management fee revenue
decreased over this period primarily due to the lease of the 14
facilities from Ventas during the quarter ended March&nbsp;31,
2004, that were previously managed by us, offset by nine new
management agreements entered into during the second half of
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Operating Expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The increase in total operating expenses was attributable to the
following: (i)&nbsp;facility operating expenses increased
$10.5&nbsp;million, or 10.5%; (ii)&nbsp;general and
administrative expenses increased $1.2&nbsp;million, or 11.7%;
and (iii)&nbsp;lease expenses increased $28.7&nbsp;million, or
160.9%; which increases were offset by a decrease in
depreciation and amortization expenses of $9.0&nbsp;million, or
61.7%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Explanations of significant variances noted in individual
line-item expenses for the three months ended March&nbsp;31,
2005 as compared to the three months ended March&nbsp;31, 2004
are as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Of our increased facility operating expenses, $2.4&nbsp;million,
    or 2.5%, was attributable to the 328 facilities we operated
    during both periods. The increase was primarily due to increases
    in salaries, wages and benefits and a full three months of
    operations from the 14 facilities that we leased from Ventas
    during the quarter ended March&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    General and administrative expenses increased $1.2&nbsp;million,
    or 11.7%, primarily as a result of an increase in salaries,
    wages and benefits, and an increase in the number of employees
    in anticipation of the acquisition of the Fortress CCRC
    Portfolio and Prudential Portfolio that were acquired in the
    second and third quarter of 2005. General and administrative
    expenses as a percentage of total revenue, including revenue
    generated by the facilities we manage,</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">43

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    was 5.9% and 6.1% for the three months ended March&nbsp;31, 2005
    and 2004, respectively, calculated as follows:</TD>
</TR>

</TABLE>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Combined resident fee revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">154,583</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fee revenues under
    management
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,734</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,666</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">193,846</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">167,249</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,433</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,239</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative expenses
    as of % of total revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Lease expenses increased $28.7&nbsp;million, or 160.9%,
    primarily due to a full quarter of lease payments under the
    Ventas operating leases that we entered into during the first
    half of 2004 and the Provident leases that we entered into
    during the fourth quarter of 2004, including $6.1&nbsp;million
    of additional lease expense from straight-line rent expense,
    partially offset by $2.3&nbsp;million of deferred gain
    amortization.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Total depreciation and amortization expense decreased by
    $9.0&nbsp;million, or 61.7%, primarily due to sale-leaseback
    arrangements entered into with respect to the 68 facilities sold
    and leased back from Provident in the fourth quarter of 2004,
    partially offset by increased depreciation on capital
    expenditures and leasehold improvements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Interest income increased $0.1&nbsp;million, or 61.6%, primarily
    due to an increase in cash and cash equivalents invested from
    the Provident transaction proceeds.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Interest expense decreased $16.2&nbsp;million, or 77.0%,
    primarily due to approximately $433.6&nbsp;million of our debt
    that was assumed by Provident or repaid using proceeds from the
    sale-leaseback arrangements in the fourth quarter of 2004,
    offset by an increase related to the change in fair value of
    interest rate swaps and increased interest rates on
    floating-rate debt.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">44

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Comparison of Year Ended December&nbsp;31, 2004 to Year
Ended December&nbsp;31, 2003</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth, for the periods indicated,
statement of operations items and the amount and percentage of
increase or decrease of these items. The results of operations
for any particular period are not necessarily indicative of
results for any future period. The following data should be read
in conjunction with our combined financial statements and the
notes thereto, which are included herein ($ in 000&#146;s). Our
results reflect the inclusion of Alterra in our operations
effective December&nbsp;1, 2003.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Increase</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">% Increase</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Decrease)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Decrease)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT face="helvetica,arial">Statement of Operations
    Data:</FONT></I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">657,327</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">440,111</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">202.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,545</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,368</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,823</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(34.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">660,872</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">222,584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">438,288</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">196.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">415,169</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">133,119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">282,050</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">211.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,744</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">69,253</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">225.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,640</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,643</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">172.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,827</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">132.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">611,113</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">202,340</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">408,773</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">202.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,759</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,244</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,515</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">145.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">637</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,400</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(95.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(63,634</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25,106</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(38,528</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(153.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in fair value of derivatives
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,176</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,176</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss from sale of properties
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(24,513</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,513</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain on extinguishment of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,051</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,511</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,460</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(91.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in earnings (loss) of
    unconsolidated ventures, net of minority interests
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(931</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">318</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,249</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(392.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss before income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,056</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,509</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,547</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(300.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Provision) benefit for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(139</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,972</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,893.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before discontinued
    operations and cumulative effect of a change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,167</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,648</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(18,519</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(699.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(722</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(643</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(79</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of change in
    accounting principle, net of tax of $8,095 in 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,208</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,390</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(32.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT face="helvetica,arial">Selected Operating and Other
    Data:</FONT></I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Number of facilities (at end of
    period)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">367</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">359</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total units/beds operated(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,108</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,423</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,685</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Owned/leased facilities units/beds
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,540</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,324</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Owned/leased facilities occupancy
    rate:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Period end
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">87.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Weighted average
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">87.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(0.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(0.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Managed facilities units/beds
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,568</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,099</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(531</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Managed facilities period end
    occupancy rate(2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Average monthly revenue per
    unit/bed(3)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,827</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,660</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">167</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Total units/beds operated represent the total units/beds
    operated as of the end of the period. Occupancy rate is
    calculated by dividing total occupied units/beds by total
    units/beds operated as of the end of the period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes facilities managed by us but excludes Town Village
    Oklahoma City, which is currently under development.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Average monthly revenue per unit/bed represents the average of
    the total monthly revenues divided by occupied units/beds at the
    end of the period averaged over the respective period presented
    and for the period of time in operation during the period for
    the same stores.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">45

</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Total revenues increased primarily due to increased resident
fees of $440.1&nbsp;million, or 202.6%, the inclusion of Alterra
into our operations for a full year following the Effective Date
in December 2003, leasing of the 15 Ventas facilities in the
first half of 2004 (14 of which were leased in the three months
ended March&nbsp;31, 2004 and one of which was leased on
May&nbsp;13, 2004), partially offset by a decrease in management
fee revenue of $1.8&nbsp;million, or 34.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Resident fee revenue.</I></B> Resident fees increased by
$11.6&nbsp;million, or 6.5%, at the 29 facilities we operated
during both periods. The remaining increase was primarily due to
the addition of Alterra into our operations for a full year
following the Effective Date, the consolidation of the five
facilities developed and managed by us pursuant to revised
Interpretation No.&nbsp;46, <I>Consolidation of Variable
Interest Entities</I>, an interpretation of ARB No.&nbsp;51
(&#147;FIN&nbsp;46R&#148;) and an increase in resident fees
resulting from the 15 facilities leased from Ventas in the first
half of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Management fee revenue.</I></B> Management fee revenue
decreased over this period primarily due to the 14 properties
leased from Ventas that were previously managed by us, partially
offset by the additional nine facilities (which include
1,915&nbsp;units/beds) for which we took over management in
August and December 2004, and consolidation of five facilities
developed and managed by us pursuant to FIN&nbsp;46R at
December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Operating Expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The increase in total operating expenses was attributable to the
following: (i)&nbsp;facility operating expenses increased
$282.1&nbsp;million, or 211.9%; (ii)&nbsp;general and
administrative expenses increased $27.6&nbsp;million, or 172.8%;
(iii)&nbsp;lease expenses increased $69.3&nbsp;million, or
225.3%; and (iv)&nbsp;depreciation and amortization expenses
increased $29.8&nbsp;million, or 132.7%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Explanations of significant variances noted in individual
line-item expenses for the year ended December&nbsp;31, 2004 as
compared to the year ended December&nbsp;31, 2003 are as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Of our increased facility operating expenses, $4.6&nbsp;million,
    or 4.4%, was attributable to the 29 facilities we operated
    during both periods. The remaining increase was primarily a
    result of the inclusion of Alterra into our operations for a
    full year following the Effective Date in December 2003, the
    consolidation of the five facilities pursuant to FIN&nbsp;46R
    developed and managed by us and expenses associated with
    operating an additional 15 facilities leased from Ventas in the
    first half of 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    General and administrative expenses increased
    $27.6&nbsp;million, or 172.8%, primarily as a result of the
    inclusion of Alterra into our operations for a full year
    following the Effective Date in December 2003, and an increase
    in salaries, wages and number of personnel (due to wage and
    salary increases and an additional nine properties we managed
    during the second half of 2004). General and administrative
    expense as a percentage of total revenue, including revenue
    generated by the facilities we manage was 6.0% and 4.9% for the
    years ended December&nbsp;31, 2004 and 2003, respectively,
    calculated as follows ($ in 000&#146;s):</TD>
</TR>

</TABLE>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Combined resident fee revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">657,327</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217,216</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fee revenues under
    management
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">64,191</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">108,320</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">721,518</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">325,536</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,640</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,997</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative expenses
    as of % of total revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">46

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Lease expense increased $69.3&nbsp;million, or 225.3%, primarily
    due to lease expense associated with a full year&#146;s
    operation of Alterra following the Effective Date in December
    2003, the addition of 15 operating leases executed during the
    first half of 2004 for the Ventas facilities, and the addition
    of 68 operating leases executed during the fourth quarter 2004
    for the Provident facilities, including $3.5&nbsp;million of
    additional straight-line rent expense, partially offset by
    $1.7&nbsp;million of additional deferred gain amortization.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Total depreciation and amortization expense increased by
    $29.8&nbsp;million, or 132.7%, primarily due to depreciation and
    amortization on Alterra&#146;s owned facilities, taking into
    account a full year&#146;s operation of Alterra following the
    Effective Date in December 2003, capital additions (including
    capital additions from 15 additional facilities leased from
    Ventas in 2004); the purchase of 15 facilities previously leased
    by us and the consolidation of five facilities pursuant to
    FIN&nbsp;46R developed and managed by us at December&nbsp;31,
    2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Interest income decreased $13.4&nbsp;million, or 95.5%,
    primarily due to the reduction in lease security deposits
    resulting from the purchase of 15 facilities in 2003 and one
    facility in 2002 that were previously leased by us.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Interest expense increased $35.4&nbsp;million, or 140.8%,
    primarily due to the cost of servicing Alterra&#146;s debt
    obligations for a full year following the Effective Date in
    December 2003, five facilities consolidated at December&nbsp;31,
    2003, pursuant to FIN&nbsp;46R, and interest expense from 15
    facilities purchased in 2003 and one facility purchased in 2002
    that were previously leased by us. This increase was partially
    offset by a $3.2&nbsp;million decrease in the fair value
    liability of the interest rate swaps from December&nbsp;31, 2003
    to December&nbsp;31, 2004.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">47

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Comparison of Year Ended December&nbsp;31, 2003 to Year
Ended December&nbsp;31, 2002</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth, for the periods indicated,
statement of operations items and the amount and percentage of
increase or decrease of such item. The results of operations for
any particular period are not necessarily indicative of results
for any future period. The following data should be read in
conjunction with our combined financial statements and the notes
thereto, which are included herein ($ in 000&#146;s). Our
results reflect the inclusion of Alterra in our operations,
effective December&nbsp;1, 2003.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Increase</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">% Increase</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Decrease)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Decrease)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT face="helvetica,arial">Statement of Operations
    Data:</FONT></I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">156,894</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60,322</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">38.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,368</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,622</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">746</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">222,584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">161,516</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">61,068</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">133,119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,980</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">40,139</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,744</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,003</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(259</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(0.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,540</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,457</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,708</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,772</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">64.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">202,340</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">150,231</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,109</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">34.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,244</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,285</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,959</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">79.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,967</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(22.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense&nbsp;&#151; debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25,106</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,490</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(15,616</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(164.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss from sale of properties
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(24,513</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(24,513</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain on extinguishment of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,511</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,511</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in earnings (loss) of
    unconsolidated ventures, net of minority interests
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">318</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(266</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(45.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss before income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,509</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,383</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(22,892</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(112.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Provision) benefit for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(139</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,527</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before discontinued
    operations and cumulative effect of a change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,648</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(14,365</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(122.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(643</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(643</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of change in
    accounting principle, net of tax of $8,095 in 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(28,216</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(240.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT face="helvetica,arial">Selected Operating and Other
    Data:</FONT></I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Number of facilities (at end of
    period)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">359</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">299</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">498.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total units/beds operated(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,423</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,334</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,089</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">115.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Owned/leased facilities units/beds
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,324</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,591</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,733</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">208.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Owned/leased facilities occupancy
    rate:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Period end
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">87.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">91.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Weighted average
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">90.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Managed facilities units/beds(2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,099</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,743</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(644</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Managed facilities period end
    occupancy rate(2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">79.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Average monthly revenue per
    unit/bed(3)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,660</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,516</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">144</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Total units/beds operated represent the total units/beds
    operated as of the end of the period. Occupancy rate is
    calculated by dividing total occupied units/beds by total
    units/beds operated as of the end of the period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes facilities managed by us but excludes Town Village
    Oklahoma City, which is currently under development.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Average monthly revenue per unit/bed represents the average of
    the total monthly revenues divided by occupied units/beds at the
    end of the period averaged over the respective period presented
    and for the period of time in operation during the period for
    the same stores.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">48

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our total revenues increased primarily due to increased resident
fees of $60.3&nbsp;million, or 38.4%, the inclusion of Alterra
into our operations effective December&nbsp;1, 2003, the leasing
of the Chambrel portfolio as of May&nbsp;1, 2002, the purchase
of three facilities in November 2002 that were previously
managed by us and an increase in management fee revenue of
$0.7&nbsp;million, or 16.1% (due to increased revenues from
facilities developed and managed by us and an additional eight
Grand Court facilities managed by us).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Resident fee revenue.</I></B> Resident fees increased by
$2.3&nbsp;million, or 1.9%, at the 21 facilities we operated
during both periods. The remaining increase in resident fee
revenue was primarily due to the inclusion of Alterra into our
operations following the Effective Date (December 2003), to the
leasing of the Chambrel portfolio as of May&nbsp;1, 2002 and the
purchase of three facilities in November 2002 that were
previously managed by us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Management fee revenue.</I></B> Increased management fee
revenues were primarily due to increased revenues from
facilities developed and managed by us and an additional eight
Grand Court facilities managed by us, partially offset by the
three facilities purchased in November 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Operating Expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The increase in total operating expenses was attributable to the
following: (i)&nbsp;facility operating expenses increased
$40.1&nbsp;million, or 43.2%; (ii)&nbsp;general and
administrative expenses increased $3.5&nbsp;million, or 27.6%;
(iii)&nbsp;lease expense decreased $0.3&nbsp;million, or 0.8%;
and (iv)&nbsp;depreciation and amortization increased
$8.8&nbsp;million, or 64.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Explanations of significant variances noted in individual
line-item expenses for the year ended December&nbsp;31, 2003 as
compared to the year ended December&nbsp;31, 2002 are as follows:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Of our increased facility operating expenses, $2.1&nbsp;million,
    or 3.0%, was attributable to the 21 facilities we operated
    during both periods. The remaining increase was primarily due to
    the inclusion of Alterra into our operations following the
    Effective Date, the leasing of the Chambrel portfolio effective
    May&nbsp;1, 2002 and the purchase of the three facilities in
    November 2002.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    General and administrative expenses increased $3.5&nbsp;million,
    or 27.6%, primarily due to the inclusion of Alterra into our
    operations following the Effective Date and an increase in
    salaries, wages and number of personnel, due to the leasing of
    the Chambrel portfolio and an additional 12 facilities managed
    by us. General and administrative expenses as a percentage of
    total revenue, including those generated by the facilities we
    manage, was 4.9% and 5.2% for the years ended December&nbsp;31,
    2003 and 2002, respectively, calculated as follows ($in
    000&#146;s):</TD>
</TR>

</TABLE>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Combined resident fee revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">156,894</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fee revenues under
    management
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">108,320</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,206</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">325,536</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">240,100</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,540</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative expenses
    as of % of total revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Lease expenses decreased $0.3&nbsp;million, or 0.8%, primarily
    due the purchase of 14 facilities and one facility in 2003 and
    2002, respectively, that were previously leased by us, offset by
    the inclusion of Alterra into our operations following the
    Effective Date in December 2003 and</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">49

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<FONT face="helvetica,arial">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    the leasing of the Chambrel portfolio effective May&nbsp;1,
    2002, including $2.7&nbsp;million of reduced straight-line rent
    expense and an additional $0.3&nbsp;million of deferred gain
    amortization.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Total depreciation and amortization expenses increased by
    $8.8&nbsp;million, or 64.0%, primarily due to the purchase of 14
    facilities and one facility in 2003 and 2002, respectively, that
    were previously leased by us and the inclusion of Alterra into
    our operations following the Effective Date in December 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Interest income decreased $4.0&nbsp;million, or 22.0%, primarily
    due to the reduction in lease security deposits resulting from
    the purchase of 14 facilities and one facility in 2003 and 2002,
    respectively, that were previously leased by us.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Interest expense increased $15.6&nbsp;million, or 164.6%,
    primarily due to the financing of the purchase of 14 facilities
    and one facility in 2003 and 2002, respectively, that were
    previously leased by us and the purchase of three facilities in
    November 2002 that were previously managed by us.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our liquidity requirements have historically arisen from, and we
expect they will continue to arise from, working capital,
general and administrative costs, debt service and lease
payments, acquisition costs, employee compensation and related
benefits, capital improvements and dividend payments. In the
past we have met our cash requirements for operations using cash
flows from operating revenues, the receipt of resident fees and
the receipt of management fees from third-party-managed
facilities. In addition to using cash flows from operating
revenues, we use available funds from our indebtedness and
long-term leasing of our facilities to meet our cash
obligations. Over 98% of our resident fee revenues are generated
from private pay residents with less than 2% of our resident fee
revenues coming from reimbursement programs such as Medicare and
Medicaid. The primary use of our cash is for operating costs,
which includes debt service and lease payments and capital
expenditures. We expect to meet our cash requirements for the
next 12&nbsp;months from these sources as well as from cash
generated from this offering and the credit facility we expect
to enter into, as discussed below in &#147;&#151;&nbsp;New
Credit Facility.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect to fund the growth of our business through cash flows
from operations and cash flows from financing activities, such
as this offering, and through the incurrence of additional
indebtedness or leasing arrangements. We expect to assess our
financing alternatives periodically and access the capital
markets opportunistically. If our existing resources are
insufficient to satisfy our liquidity requirements, or if we
enter into an acquisition or strategic arrangement with another
company, we may need to sell additional equity or debt
securities. Any such sale of additional equity securities will
dilute the interests of our existing stockholders, and we cannot
be certain that additional public or private financing will be
available in amounts or on terms acceptable to us, if at all. If
we are unable to obtain this additional financing, we may be
required to delay, reduce the scope of, or eliminate one or more
aspects of our business development activities, which could harm
the growth of our business. Upon consummation of this offering
and the application of the net proceeds, we expect to have
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
in cash and cash equivalents. We may incur additional
indebtedness or lease financing to fund such acquisitions. In
addition, we may incur additional indebtedness or lease
financing to fund future dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our actual liquidity and capital funding requirements depend on
numerous factors, including our operating results, our ability
to acquire new facilities, general economic conditions and the
cost of capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cash Flows</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We had cash and cash equivalents of $76.1&nbsp;million,
39.3&nbsp;million, $86.9&nbsp;million and $56.5&nbsp;million at
March&nbsp;31, 2005, March&nbsp;31, 2004, December&nbsp;31, 2004
and December&nbsp;31, 2003, respectively.
</DIV>

<P align="center" style="font-size: 10pt;">50

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<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
These amounts exclude cash and investments-restricted and lease
security deposits totaling $69.4&nbsp;million,
$36.8&nbsp;million, $74.2&nbsp;million and $61.6&nbsp;million,
respectively, escrowed pursuant to the terms of our
indebtedness, leases, residency agreements and insurance
programs. Restricted cash amounts are generally available to pay
real estate taxes and insurance premiums, reimbursements of
capital improvements and refundable tenant security deposits,
and to collateralize our debt, lease and self-insured retention
obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The increase in cash and cash equivalents at March&nbsp;31, 2005
as compared to March&nbsp;31, 2004 was primarily due to the
following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Net cash (used in) provided by operating activities for the
    three months ended March&nbsp;31, 2005 totaled approximately
    ($4.4&nbsp;million), compared to approximately $5.6&nbsp;million
    for the three months ended March&nbsp;31, 2004, primarily due to
    increased facility lease expense related to the Provident
    sale-leaseback that occurred in the fourth quarter of 2004 and
    payment of accrued expenses during 2004, partially offset by
    reduced interest expense for the properties related to the
    Provident sale-leaseback;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Net cash (used in) provided by investing activities for the
    three months ended March&nbsp;31, 2005 totaled approximately
    ($1.8&nbsp;million)&nbsp;million, compared to approximately
    $23.0&nbsp;million for the three months ended March&nbsp;31,
    2004, primarily due to the sale of the Grand Court
    partnerships&#146; facilities, the proceeds of which were used
    to repay loans and amounts due from the partnerships and to pay
    distributions to the general and limited partners (of which we
    owned interests through our investment in GFB-AS Investors,
    LLC), and the release of cash from cash and
    investments-restricted; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Net cash used in financing activities for the three months ended
    March&nbsp;31, 2005 totaled approximately $4.6&nbsp;million,
    compared to approximately $45.7&nbsp;million for the three
    months ended March&nbsp;31, 2004, primarily due to repayment of
    outstanding indebtedness related to the sale of properties in
    the first quarter of 2004, offset by proceeds of debt we
    obtained in the first quarter of 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The increase in cash and cash equivalents at December&nbsp;31,
2004 from December&nbsp;31, 2003 was primarily due to the
following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Net cash provided by operating activities for the year ended
    December&nbsp;31, 2004 totaled approximately $50.1&nbsp;million,
    compared to approximately $34.1&nbsp;million for the year ended
    December&nbsp;31, 2003, primarily due to the inclusion of
    Alterra into our operations following the Effective Date in
    December 2003 and improved operations and partially offset by
    the consolidation of five facilities pursuant to FIN&nbsp;46R,
    effective December&nbsp;31, 2003, that were still in lease up
    and generating operating deficits;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Net cash provided by investing activities for the year ended
    December&nbsp;31, 2004 totaled approximately
    $524.7&nbsp;million, compared to approximately
    $105.9&nbsp;million for the year ended December&nbsp;31, 2003,
    primarily due to the receipt of proceeds from the Provident
    sale-leaseback transaction, partially offset by the inclusion of
    Alterra effective December&nbsp;1, 2003; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Net cash used in financing activities for the year ended
    December&nbsp;31, 2004 totaled approximately
    $544.5&nbsp;million, compared to approximately
    $85.7&nbsp;million for the year ended December&nbsp;31, 2003,
    primarily due to payment of a dividend of $304.6&nbsp;million to
    our stockholders, of which $254.6&nbsp;million was paid in
    connection with the Provident sale-leaseback in the fourth
    quarter 2004, and the repayment of approximately
    $312.4&nbsp;million of outstanding indebtedness.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">51

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The increase in cash and cash equivalents at December&nbsp;31,
2003 from December&nbsp;31, 2002 was primarily due to the
following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Net cash provided by operating activities for the year ended
    December&nbsp;31, 2003 totaled approximately $34.1&nbsp;million,
    compared to approximately $39.6&nbsp;million for the year ended
    December&nbsp;31, 2002, primarily due to the inclusion of
    Alterra into our operations following the Effective Date in
    December 2003, the purchase of three facilities in November 2002
    that were previously managed by us and were still in lease up
    and generating operating deficits and additional interest
    expense related to stockholder loans;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Net cash provided by (used in) investing activities for the year
    ended December&nbsp;31, 2003 totaled approximately
    $105.9&nbsp;million, compared to approximately
    ($47.3&nbsp;million) for the year ended December&nbsp;31, 2002,
    primarily due to the receipt of proceeds from the sale of
    properties and additional receipts from cash and
    investments-restricted during 2003;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Net cash (used in) provided by financing activities for the year
    ended December&nbsp;31, 2003 totaled approximately
    ($85.7&nbsp;million), compared to approximately
    $8.7&nbsp;million for the year ended December&nbsp;31, 2002, due
    to formation of our joint venture with Northwestern Mutual Life
    Insurance Co., or Northwestern, and repayment of outstanding
    indebtedness from the sale of two of the facilities to the joint
    venture and refinancing of the third facility during 2003.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>New Credit Facility</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the closing of this offering, we intend to enter into a
short-term revolving credit facility that will provide
borrowings of up to $100.0&nbsp;million; however, there can be
no assurance that we will be able to obtain the credit facility
or on the terms described herein. The revolving credit facility
is expected to bear interest at the prime rate plus 1.00%. Net
proceeds from the borrowings under our revolving credit facility
are expected to be used to fund acquisitions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect our new credit facility will contain various financial
covenants requiring us to maintain certain financial ratios.
Specifically, our new credit facility is expected to contain
financial covenants requiring us to maintain certain cash flow
requirements. In addition, the credit facility is expected to
contain various customary restrictive covenants that may limit
our and our subsidiaries&#146; ability to, among other things,
pay dividends and incur additional indebtedness.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Contractual Commitments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents a summary of our material
indebtedness, including the related interest payments, lease and
other contractual commitments, as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were no material changes to our obligations at
March&nbsp;31, 2005 as compared to December&nbsp;31, 2004, other
than the refinancing of the five facilities described in
&#147;&#151;&nbsp;Company Indebtedness, Long-Term Leases and
Hedging Agreements.&#148; In addition, in connection with the
acquisition of the Fortress CCRC Portfolio and the Prudential
Portfolio we incurred an additional $276.8&nbsp;million
aggregate amount of indebtedness.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2006</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2007</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2008</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2009</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Thereafter</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B><FONT face="helvetica,arial">($ in 000s)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Contractual Obligations:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term debt(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">371,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,888</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,320</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,437</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">193,087</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,915</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,390</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capital lease obligations(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">107,614</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">67,894</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating lease obligations(2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,904,284</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">169,255</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">173,952</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">178,088</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">180,703</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">183,763</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,018,523</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Purchase obligations(3)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,546</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,108</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">956</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">438</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">44</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,385,481</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">182,195</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">186,172</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">189,907</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">381,778</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">275,622</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,169,807</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">52

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes contractual interest for all fixed-rate obligations and
    assumes interest on variable rate instruments at the
    December&nbsp;31, 2004 rate.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Reflects future cash payments after giving effect to lease
    escalators and assumes payments on variable rate instruments at
    the December&nbsp;31, 2004 rate.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Represents minimum purchase commitments pursuant to contracts
    with suppliers.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Company Indebtedness, Long-term Leases and Hedging
Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Indebtedness</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005, December&nbsp;31, 2004 and
December&nbsp;31, 2003, our outstanding property-specific debt
was approximately $383.3&nbsp;million, $371.0&nbsp;million and
$1,029.3&nbsp;million, respectively. The decrease from
December&nbsp;31, 2003 to December&nbsp;31, 2004, was primarily
due to the assumption by Provident of approximately
$483.3&nbsp;million of indebtedness, including first mortgage
loans, mezzanine loans and an unsecured line of credit, in
connection with the Provident sale-leaseback and net repayment
of approximately $232.5&nbsp;million of indebtedness, including
$19.4&nbsp;million of loans to the stockholders of Fortress
Brookdale Acquisition LLC. The increase from December&nbsp;31,
2004 to March&nbsp;31, 2005, was primarily due to our incurring
$10.0&nbsp;million of indebtedness in connection with swap
termination payments, and the refinancing of our
$182.0&nbsp;million Guaranty Bank loan, partially offset by
scheduled principal payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have unsecured lines of credit of $28.6&nbsp;million at
March&nbsp;31, 2005, of which $8.6&nbsp;million is restricted
for certain letters of credit and bears interest at the prime
rate plus 1.00%. Of the balance, $10.0&nbsp;million was used to
pay a portion of our swap termination payment (and is expected
to be repaid from a portion of the offering proceeds) and
$7.4&nbsp;million and $0.7&nbsp;million is in the form of
outstanding letters of credit for a security deposit under
leases with Ventas and self-insured retention risk,
respectively, leaving an available balance of $1.9&nbsp;million.
As of December&nbsp;31, 2004, we had no outstanding borrowings
(excluding letters of credit) on our unsecured line of credit,
as compared to $15.4&nbsp;million outstanding, excluding letters
of credit, as of December&nbsp;31, 2003. As of December&nbsp;31,
2004, our unsecured line of credit was $18.6&nbsp;million (as
compared to $41.6&nbsp;million as of December&nbsp;31, 2003), of
which $8.6&nbsp;million is restricted for certain letters of
credit and bears interest at the prime rate plus 1.00%, with a
maturity date of May&nbsp;31, 2006. The reduction in the
available unsecured line of credit was due to our reduced
borrowing needs as a result of increased cash flow from
operations and cash and cash equivalents as a result of the
Provident transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March 30, 2005, we refinanced the construction loans secured
by five facilities with new construction loans in the aggregate
amount of $182.0&nbsp;million, bearing interest at 30-day LIBOR
plus 3.05% to 5.60% (with a weighted average of 3.50%), payable
in monthly installments of interest only through the maturity of
April&nbsp;1, 2008. The loans can be extended for two additional
one-year terms (subject to certain performance covenants and
payment of an annual extension fee of 0.25% of the amount
outstanding). See &#147;Description of Indebtedness&nbsp;&#151;
Guaranty Bank Mortgage Loan.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have secured our self-insured retention risk under our
workers&#146; compensation and general liability and
professional liability programs and our lease security deposits
with $17.1&nbsp;million and $33.9&nbsp;million, respectively, of
cash and letters of credit at March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Long-term Leases</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have historically financed our acquisitions and current
portfolio with a combination of mortgage financing and long-term
leases and we intend to continue to use these types of
financings in the future. During 2004, we entered into two
long-term leases with Ventas and Provident. In connection with
the entry leases, we substantially reduced our outstanding debt
during 2004 by $483.3&nbsp;million.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December 31, 2004, we have 307 facilities under long-term
leases. Our lessors have invested a total of
$1,874.4&nbsp;million in the facilities we lease from them. The
leased facilities are generally fixed rate leases with annual
escalators that are either fixed or tied to the consumer price
index.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have the following two leases with a floating-rate debt
component built into the lease payment:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
First, a component of the Chambrel portfolio lease payment is a
pass through of debt service, which includes $100.8 million of
floating rate tax-exempt debt, and is credit enhanced by Fannie
Mae and subject to interest rate caps at 6.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Second, the Provident lease contains $110.4 million of variable
rate mortgages, which includes $80.0 million of floating-rate
tax-exempt debt, which are credit enhanced by Freddie Mac. The
payments under the lease are subject to interest rate caps with
a weighted-average rate of 6.39%. The balance of $30.4 million
is unhedged; however, we intend to repay a portion of our
currently hedged floating-rate debt with the proceeds of this
offering and redesignate the hedge to the floating-rate lease
payment. See &#147;Use of Proceeds.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December 31, 2004, our minimum annual lease
payments for our capital and financing leases and operating
leases was $7.9 million and $169.3 million, respectively. This
amount excludes the straight-line rent expense associated with
our annual escalators and the amortization of the deferred gains
recognized in connection with the sale-leasebacks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Hedging</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, we had one interest rate swap
agreement that converted a $37.3&nbsp;million notional value of
our floating-rate construction debt to a fixed-rate basis of
5.19% through maturity on April&nbsp;1, 2005. The market value
of the swap at December&nbsp;31, 2004 and December&nbsp;31, 2003
was a liability of approximately $0.3&nbsp;million and
approximately $1.5&nbsp;million, respectively, which is included
in other current liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We had four ten-year forward interest rate swaps to fix
$97.3&nbsp;million of future mortgage debt with an interest rate
of 7.03%, at 7.325%, with maturity dates ranging from August
2012 to March 2013. In May 2004, we extended the termination
dates of these swaps to June 2006 (as discussed below). The
terms of the forward interest rate swaps require us to pay a
fixed-interest rate to the counterparties and to receive 90-day
LIBOR from the counterparty. The market value of the forward
interest rate swaps at December&nbsp;31, 2004 and
December&nbsp;31, 2003 was a liability of $17.9&nbsp;million and
$19.9&nbsp;million, respectively. Included in cash and
investments-restricted at December&nbsp;31, 2004 and
December&nbsp;31, 2003 are deposits of $8.0&nbsp;million and
$6.6&nbsp;million, respectively, to collateralize our forward
interest rate swap obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;30, 2005, we terminated the four ten-year forward
interest rate swaps and incurred a termination payment of
approximately $15.8&nbsp;million, including accrued interest,
which was funded from $5.8&nbsp;million of cash and
investments-restricted and a $10.0&nbsp;million unsecured loan
from La&nbsp;Salle Bank, N.A. The $10.0&nbsp;million unsecured
loan bears interest payable monthly at the prime rate plus
1.00%, and the principal is payable in quarterly installments of
$0.5&nbsp;million commencing July&nbsp;1, 2005 and maturing
March&nbsp;31, 2007. Pursuant to the loan agreement, the loan is
required to be repaid upon the earlier of the maturity date or
the completion of an initial public offering. We plan to repay
the balance of this loan with a portion of the proceeds of this
offering. See &#147;Use of Proceeds.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We had interest rate caps with notional amounts of approximately
$62.3&nbsp;million and approximately $15.0&nbsp;million and
strike prices of 6.35% and 6.58% that expired at June&nbsp;1,
2009 and December&nbsp;1, 2004, respectively. The interest rate
caps were assigned to Provident in October 2004. Pursuant to the
terms of our lease with Provident, the floating rate adjustment
we are required to pay is limited to the rate under the assumed
interest rate caps.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the funding of the loans from Guaranty Bank,
we entered into interest rate swaps with a notional amount of
$182.0&nbsp;million to hedge the floating rate debt and lease
payments where we pay an average fixed rate of 4.64% and receive
30-day LIBOR from the counterparty. The interest rate swaps are
comprised of a $145.0&nbsp;million notional amount for seven
years and a $37.0&nbsp;million notional amount for three years.
In connection with the swaps, we posted approximately
$2.3&nbsp;million as cash collateral with the counterparty and
are required to post additional cash collateral based on changes
in the fair value of the swaps. The swaps are recorded as cash
flow hedges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Impacts of Inflation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Resident fees for the facilities we own or lease and management
fees from facilities we manage for third parties are our primary
source of revenue. These revenues are affected by the amount of
monthly resident fee rates and facility occupancy rates. The
rates charged are highly dependent on local market conditions
and the competitive environment in which our facilities operate.
Substantially all of our independent and assisted living
residency agreements allow for adjustments in the monthly fee
payable thereunder not less frequently than 12 or
13&nbsp;months, or monthly, respectively, thereby enabling us to
seek increases in monthly fees due to inflation, increased
levels of care or other factors. Any pricing increase would be
subject to market and competitive conditions and could result in
a decrease in occupancy in the facilities. We believe, however,
that our ability to periodically adjust the monthly fee serves
to reduce the adverse affect of inflation. In addition, employee
compensation expense is a principal cost element of facility
operations and is also dependent upon local market conditions.
There can be no assurance that resident fees will increase or
that costs will not increase due to inflation or other causes.
At March&nbsp;31, 2005, approximately $483.6&nbsp;million of our
indebtedness and lease payments bore interest at floating rates.
We have mitigated $432.9&nbsp;million of our exposure to
floating rates by using $252.0&nbsp;million of interest rate
swaps and $180.9&nbsp;million of interest rate caps under our
lease arrangements. We plan to repay the remaining unhedged
floating-rate debt with a portion of the proceeds of this
offering. Inflation, and its impact on floating interest rates,
could affect the amount of interest payments due on such debt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Application of Critical Accounting Policies and Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States,
or GAAP, requires us to make estimates and judgments that affect
our reported amounts of assets and liabilities, revenues and
expenses. We consider an accounting estimate to be critical if
it requires assumptions to be made that were uncertain at the
time the estimate was made and changes in the estimate, or
different estimates that could have been selected, could have a
material impact on our combined results of operations or
financial condition. We have identified the following critical
accounting policies that affect significant estimates and
judgments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Self-Insurance Liability Accruals</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to various legal proceedings and claims that
arise in the ordinary course of our business. Although we
maintain general liability and professional liability insurance
policies for our owned, leased and managed facilities under a
master insurance program, our current policy provides for
deductibles of $1.0&nbsp;million for each and every claim. As a
result, we are effectively self-insured for most claims. In
addition, we maintain a self-insured workers compensation
program (with excess loss coverage of $0.5&nbsp;million per
individual claim) and a self-insured employee medical program
(with excess loss coverage of $0.2&nbsp;million to
$0.3&nbsp;million per individual claim). We are self-insured for
amounts below these excess loss coverage amounts. We review the
adequacy of our accruals related to these liabilities on an
ongoing basis, using historical claims, actuarial valuations,
third-party administrator estimates, consultants, advice from
legal counsel and industry data, and adjust accruals
periodically. Estimated costs related to these self-insurance
programs are accrued based
</DIV>

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<DIV align="left" style="font-size: 10pt;">
on known claims and projected claims incurred but not yet
reported. Subsequent changes in actual experience are monitored
and estimates are updated as information is available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Tax Valuation Allowance</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We account for income taxes under the provisions of Statement of
Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;109,
<I>Accounting for Income Taxes</I>. Under this method, deferred
tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of
assets and liabilities using tax rates in effect for the year in
which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts that are expected to be
realized. As of March&nbsp;31, 2005 and December&nbsp;31, 2004,
we have a valuation allowance against deferred tax assets of
approximately $88.9&nbsp;million and $89.3&nbsp;million,
respectively. When we determine that it is more likely than not
that we will be able to realize our deferred tax assets in the
future in excess of our net recorded amount, an adjustment to
the deferred tax asset would increase stockholder&#146;s equity
in the period such determination is made. This determination
will be made by considering various factors, including our
expected future results, that in our judgment will make it more
likely than not that these deferred tax assets will be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Lease Accounting</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We determine whether to account for our leases as either
operating or capital leases depending on the underlying terms.
As of December&nbsp;31, 2004, we operated 307&nbsp;facilities
under long-term leases with $2,904.3&nbsp;million of operating
and $107.6&nbsp;million of capital and financing lease
obligations. The determination of this classification is complex
and in certain situations requires a significant level of
judgment. Our classification criteria is based on estimates
regarding the fair value of the leased facilities, minimum lease
payments, our effective cost of funds, the economic life of the
facility and certain other terms in the lease agreements. As
stated in our combined financial statements included elsewhere
in this prospectus, facilities under operating leases are
accounted for in our statement of operations as lease expenses
for actual rent paid plus or minus straight-line adjustments for
fixed or estimated minimum lease escalators and amortization of
deferred gains. For facilities under capital lease and lease
financing obligation arrangements, a liability is established on
our balance sheet and a corresponding long-term asset is
recorded. Lease payments are allocated between principal and
interest on the remaining base lease obligations and the lease
asset is depreciated over the term of the lease. In addition, we
amortize leasehold improvements purchased during the term of the
lease over the shorter of their economic life or the lease term.
Sale-leaseback transactions are recorded as lease financing
obligations when the transactions include a form of continuing
involvement, such as purchase options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Two of our leases provide for various additional lease payments
based on changes in the interest rates on the debt underlying
the lease. All of our leases contain fixed or formula based rent
escalators. To the extent that the escalator increases are tied
to a fixed index or rate, lease payments are accounted for on a
straight-line basis over the life of the lease. In addition, we
recognize all rent-free or rent holiday periods in operating
leases on a straight-line basis over the lease term, including
the rent holiday period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Allowance for Doubtful Accounts</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accounts receivable are reported net of an allowance for
doubtful accounts, to represent our estimate of the amount that
ultimately will be realized in cash. The allowance for doubtful
accounts was $2.7&nbsp;million, $2.9&nbsp;million and
$7.6&nbsp;million as of March&nbsp;31, 2005, December&nbsp;31,
2004 and December&nbsp;31, 2003, respectively. The adequacy of
our allowance for doubtful accounts is reviewed on an ongoing
basis, using historical payment trends, write-off experience,
analyses of receivable portfolios by payor source and aging of
receivables, as well as a review of specific accounts, and
adjustments are made to the allowance as necessary. Changes in
legislation are not expected to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
have a material impact on collections; however, changes in
economic conditions could have an impact on the collection of
existing receivable balances or future allowance considerations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Long-lived Assets and Goodwill</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005 and December&nbsp;31, 2004, our
long-lived assets were comprised primarily of
$519.9&nbsp;million and $519.5&nbsp;million, respectively, of
property, plant and equipment. In accounting for our long-lived
assets, other than goodwill, we apply the provisions of SFAS
No.&nbsp;141, <I>Business Combinations</I>, and
SFAS&nbsp;No.&nbsp;144, <I>Accounting for the Impairment or
Disposal of Long-Lived Assets</I>. Beginning January&nbsp;1,
2002, we accounted for goodwill under the provisions of
SFAS&nbsp;No.&nbsp;142, <I>Goodwill and Other Intangible
Assets</I>. As of March&nbsp;31, 2005 and December&nbsp;31,
2004, we had $9.0&nbsp;million of goodwill.
</DIV>

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In determining the allocation of the purchase price of
facilities to net tangible and identified intangible assets
acquired, we make estimates of the fair value of the tangible
and intangible assets using information obtained as a result of
pre-acquisition due diligence, marketing, leasing activities and
independent appraisals. We allocate a portion of the purchase
price to the value of leases acquired based on the difference
between the facility valued with existing leases adjusted to
market rental rates and the facility valued as if vacant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The determination and measurement of an impairment loss under
these accounting standards requires the significant use of
judgment and estimates. The determination of fair value of these
assets utilizes cash flow projections that assume certain future
revenue and cost levels, assumed cap and discount rates based
upon current market conditions and other valuation factors, all
of which involve the use of significant judgment and estimation.
Future events may indicate differences from management&#146;s
current judgments and estimates, which could, in turn, result in
impairment. Future events that may result in impairment charges
include increases in interest rates, which would impact discount
rates, differences in projected occupancy rates and changes in
the cost structure of existing communities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recently Issued Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>SFAS&nbsp;No.&nbsp;123, Share-Based Payment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the Financial Accounting Standards Board
(&#147;FASB&#148;) issued SFAS&nbsp;No.&nbsp;123 (revised),
<I>Share-Based Payment</I>, which addresses the accounting for
transactions in which an entity exchanges its equity instruments
for goods or services, with a primary focus on transactions in
which an entity obtains employee services in share-based payment
transactions. SFAS&nbsp;No.&nbsp;123R is a revision to
SFAS&nbsp;No.&nbsp;123 and supersedes Accounting Principles
Board (AB)&nbsp;Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees</I>, and its related implementation
guidance. For all companies, this Statement will require
measurement of the cost of employee services received in
exchange for stock compensation based on the grant-date fair
value of the employee stock options. Incremental compensation
costs arising from subsequent modifications of stock awards
after the grant date must be recognized. This Statement will be
effective for us as of January&nbsp;1, 2006. The impact of
adoption of this statement is not known at this time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>FASB Interpretation No.&nbsp;46, Consolidation of Variable
Interest Entities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, the &#147;FASB&#148; issued FIN&nbsp;46R. This
Interpretation addresses the consolidation by business
enterprises of primary beneficiaries in variable interest
entities (&#147;VIEs&#148;) as defined in the Interpretation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We developed and manage five facilities for third-party
entities, for which we have guaranteed certain debt obligations
and have the right to purchase or lease the facilities. We
evaluated our relationship with the entities that own the
facilities pursuant to FIN&nbsp;46R, and determined they are
VIEs, of which we are the primary beneficiary. We elected to
adopt FIN&nbsp;46R as of December&nbsp;31,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
2003 and accordingly, consolidated the entities as of
December&nbsp;31, 2003 in the accompanying financial statements.
On March&nbsp;1, 2005, we obtained legal title to four of the
VIEs (The Meadows of Glen Ellyn, The Heritage of Raleigh,
Trillium Place and The Hallmark of Creve Coeur facilities). As
these four VIEs were previously consolidated pursuant to
FIN&nbsp;46R, the legal acquisition of the facilities had
minimal accounting impact. At March&nbsp;31, 2005, The Hallmark,
Battery Park City remains consolidated pursuant to FIN&nbsp;46R.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Off-Balance Sheet Arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have one joint venture with an affiliate of Northwestern
which owns and operates two facilities, The Heritage of
Southfield, Southfield, Michigan (which includes
218&nbsp;units/beds) and The Devonshire of Mt.&nbsp;Lebanon,
Mt.&nbsp;Lebanon (Pittsburgh), Pennsylvania (which includes
217&nbsp;units/beds), which represents 1.7% of our total unit
capacity. The venture partner made a first mortgage loan to a
third facility owned by us, The Heritage at Gaines Ranch,
Austin, Texas (which includes 208&nbsp;units/beds) and the
venture made a mezzanine loan of $12.7&nbsp;million to the
entity that owns the facility. Pursuant to the terms of the
mezzanine loan, all net cash flow, including sale or refinancing
proceeds, is payable to the venture. Pursuant to the terms of
the venture agreements all net cash flow, including sale or
refinancing proceeds, is distributed to the venture partner
until it receives a 16% compounded return and then net cash flow
is distributed 60% to the venture partner and 40% to us. Capital
contributions, if any, are contributed 75% by the venture
partner and 25% by us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We developed and managed eight facilities for a third party. In
addition, we indemnified the owner for any federal or state tax
liabilities associated with the ownership of the facilities.
Three of the facilities were purchased in 2002 and in September
2003 they were sold or refinanced by the joint venture described
above. As described above, effective December&nbsp;31, 2003, the
remaining five facilities (which include 1,104&nbsp;units/beds)
were consolidated in our financial statements pursuant to
FIN&nbsp;46R. Prior to purchasing and consolidating the
facilities in our financial statements, we recorded management
fees of 5% - 7% of gross revenues with respect to the facilities
in our combined financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As described above, on March&nbsp;1, 2005, we purchased four of
the facilities (which include 887&nbsp;units/beds). We expect to
purchase the fifth facility (which includes 217&nbsp;units/beds)
during the third quarter of 2005. Although the facilities were
consolidated effective December&nbsp;31, 2003, pursuant to
FIN&nbsp;46R, they were not included in our Federal and state
income tax returns until we purchased them. On March&nbsp;30,
2005, we obtained $182.0&nbsp;million of first mortgage
financing to refinance the existing indebtedness on the five
facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Quantitative and Qualitative Disclosures About Market Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to market risks from changes in interest rates
charged on our credit facilities used to finance acquisitions on
an interim basis, floating-rate indebtedness and lease payments
subject to floating rates. The impact on earnings and the value
of our long-term debt and lease payments are subject to change
as a result of movements in market rates and prices. As of
December&nbsp;31, 2004, we had approximately $371.0&nbsp;million
of long-term fixed rate debt, $107.6&nbsp;million of capitalized
lease obligations, and $2,904.3&nbsp;million of operating lease
obligations. As of December&nbsp;31, 2004, our total fixed-rate
debt and variable-rate debt outstanding had weighted-average
interest rates of 7.63% and 7.60%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not expect changes in interest rates to have a material
effect on earnings or cash flows since 100% of our debt and
lease payments either have fixed rates or variable rates that
are subject to swap agreements with major financial institutions
to manage our risk.
</DIV>

<P align="center" style="font-size: 10pt;">58

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents future principal payment
obligations and weighted-average interest rates as of
December&nbsp;31, 2004 associated with long-term debt
instruments ($&nbsp;in&nbsp;000s).
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Weighted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Average</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B><FONT face="helvetica,arial">Expected Maturity Date&nbsp;&#151; Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Interest</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Rate</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2006</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2007</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2008</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2009</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Thereafter</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage notes payable 2008 through
    2009
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.42%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,578</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">466</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">470</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,740</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,422</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage Notes payable 2005 through
    2037
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8.45%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75,903</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,199</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,391</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,378</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,570</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">67,078</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,287</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Construction and mezzanine loans
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9.61%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">179,248</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,091</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">178,157</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capital and financing lease
    obligation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11.83%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,284</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,284</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mezzanine loan
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,739</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,739</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Serial and term revenue bonds
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7.36%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,865</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">310</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">330</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">345</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">385</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">415</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,080</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Notes payable-joint venture
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9.00%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,420</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">822</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,129</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,234</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,235</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total Debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">371,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,888</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,320</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,437</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">193,087</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,915</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,390</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Payable to the extent of all available net cash flow (as
    defined).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Non-GAAP Financial Measures</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are material limitations to using measures such as
Adjusted EBITDA, Cash Earnings and Facility Operating Income,
including an inability to compare results with other companies
and to analyze significant items (including depreciation,
interest and lease expense) that directly affect our income or
loss. We compensate for these limitations by considering the
economic effect of the excluded amounts independently, as well
as in connection with our analysis of net income. Adjusted
EBITDA, Cash Earnings and Facility Operating Income is
considered in addition to, but not as a substitute for, other
measures of financial performance reported in accordance with
GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Adjusted EBITDA</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjusted EBITDA is a non-GAAP measure used by management to
evaluate our operations and is commonly used in the industry,
and is not used as a substitute for income from operations, net
income (loss), or cash flows provided by or used in operations,
investing or financing activities or other balance sheet, income
or cash flow statement data prepared in accordance with GAAP. We
define Adjusted EBITDA as net income (loss) before non-operating
(income) loss, depreciation and amortization, (gain)&nbsp;loss
on sale of facilities, straight-line rent expense (income),
amortization of deferred entrance fees and non-cash compensation
expense and including entrance fee receipts and refunds. We
believe Adjusted EBITDA gives investors a more accurate picture
of cash generated by us because:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    It is a primary measure used by management to evaluate the
    economic productivity of our operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    It is widely used to measure performance without regard to such
    items as depreciation and amortization, which can vary depending
    on the book value and depreciable lives of assets;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    It helps investors meaningfully evaluate and compare the results
    of our operations from period to period by removing the impact
    of our capital structure (primarily interest on our outstanding
    debt and non-cash lease expense and credit) and asset base
    (primarily depreciation and amortization).</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">59

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our management uses Adjusted EBITDA:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In its presentations to the board of directors to enable the
    board to have the same measurement of operating performance used
    by management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    For planning purposes, including preparation of our annual
    budget;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    As a valuation measure in strategic analysis in connection with
    lease and debt financing alternatives and the purchase and sale
    of assets;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    As a measure of operating structure to remove the impact of our
    capital structure (primarily interest on our outstanding debt
    and non-cash lease expense or credits) and asset base (primarily
    depreciation and amortization).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below shows Adjusted EBITDA for the three months ended
March&nbsp;31, 2005 and 2004 and the years ended
December&nbsp;31, 2004, 2003 and 2002.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of a change in
    accounting principle, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,208</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">116</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,367</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,203</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,072</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Provision (benefit) for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">120</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,260</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,630</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(290</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,666</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">974</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">114</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in (earnings)&nbsp;loss of
    unconsolidated ventures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">373</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">931</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(318</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(584</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss (gain)&nbsp;extinguishment of
    debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">453</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,051</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,511</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on sale of properties
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,513</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,623</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,236</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">55,851</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,484</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,490</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capitalized lease obligation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,276</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,931</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,783</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">622</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in fair value of derivatives
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,062</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,832</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,176</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest Income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(362</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(224</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(637</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(14,037</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(18,004</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income From Operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,124</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,162</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,759</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,244</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,285</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,597</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,708</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Straight-line lease expense (income)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,094</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,588</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,102</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,837</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of deferred gain
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,296</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,260</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(539</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(230</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Non-cash compensation expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Entrance fee receipts
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Entrance fee disbursements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Adjusted EBITDA</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,518</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,562</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">104,394</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,287</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28,600</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash Earnings</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash Earnings is a non-GAAP measure used by management to
evaluate our operations and to assess our capacity to pay
dividends and is not used as a substitute for income from
operations, net income (loss), or cash flows provided by or used
in operations, investing or financing activities or other
balance sheet, income or cash flow statement data prepared in
accordance with GAAP. We
</DIV>

<P align="center" style="font-size: 10pt;">60

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
define Cash Earnings as Adjusted EBITDA (as defined above) after
interest expense (including capitalized lease expense), interest
income and recurring capital expenditures. We believe Cash
Earnings gives investors a more accurate picture of cash
generated by us because:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    It is a primary measure used by management to evaluate the
    economic productivity of our operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    It is widely used to measure performance without regard to such
    items as depreciation and amortization, which can vary depending
    on the book value and depreciability of assets;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    It helps investors meaningfully evaluate and compare the results
    of our operations from period to period by removing the impact
    of our asset base (primarily depreciation and amortization).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our management uses Cash Earnings:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In its presentations to the board of directors to enable the
    board to have the same measurement of operating performance used
    by management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    For planning purposes, including preparation of our annual
    budget;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    As a valuation measure in strategic analysis in connection with
    lease and debt financing alternatives and the purchase and sale
    of assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    As a measure of operating structure to remove the impact of our
    asset base (primarily depreciation and amortization); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    To assess our cash available for dividends to stockholders.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below shows the reconciliation of Adjusted EBITDA to
Cash Earnings for the three months ended March&nbsp;31, 2005 and
2004 and the years ended December&nbsp;31, 2004, 2003 and 2002.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Adjusted EBITDA</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,518</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,562</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">104,394</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,287</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28,600</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,623</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,236</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(55,851</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(24,484</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,490</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capitalized lease obligation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,983</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,931</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,783</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(622</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">362</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">224</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">637</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,004</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Recurring capital expenditures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,428</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,999</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,527</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,434</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,291</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Cash Earnings</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,154</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,620</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,870</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,784</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,823</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Facility Operating Income</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Facility Operating Income is defined as resident fees less
facility operating expenses. We believe this is a useful measure
used by management to determine the operating results of our
facilities, which can be used to service indebtedness or lease
obligations (which are generally fixed rate debt or leases, or
floating rate debt or leases hedged by interest rate swaps and
interest rate caps).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our management uses Facility Operating Income:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In its presentations to the board of directors to enable the
    board to have a measure of facility operating performance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    For planning purposes, including preparation of our annual
    budget and capital resource allocations;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">61

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    As a valuation measure in strategic financing alternatives and
    the purchase and sale of facilities;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    To evaluate the impact of a facility&#146;s operations on our
    operating income;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our lenders and lessors use Facility Operating Income:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    To evaluate the performance of a given facility or the
    facilities securing the indebtedness or lease obligation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    To evaluate debt service and lease coverage ratios;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    As a valuation measure in strategic analyses in connection with
    the financing and sale of facility alternatives.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below shows Facility Operating Income for the three
months ended March&nbsp;31, 2005 and 2004, and the years ended
December&nbsp;31, 2004, 2003 and 2002:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">154,583</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">657,327</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">156,894</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(110,328</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(99,810</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(415,169</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(133,119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(92,980</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63,784</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54,773</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">242,158</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84,097</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63,914</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating margin
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">38.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">40.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">62

</FONT>

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<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='110'></A>
</DIV>

<!-- link1 "INDUSTRY OVERVIEW" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDUSTRY OVERVIEW</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Senior Living Industry</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Housing alternatives for seniors include a broad spectrum of
senior living service and care options, including independent
living, assisted living, memory care, skilled nursing care and
continuing care retirement communities, or CCRCs.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B>Independent living </B>is designed for seniors who choose to
    live in an environment surrounded by their peers where they pay
    for certain services such as housekeeping, meals and activities
    as part of their monthly resident fee, but are generally not
    reliant on assistance with activities of daily living, or ADLs,
    such as bathing, eating, toileting, transferring and dressing;
    some residents however, may contract with outside providers for
    those services. Independent living residents tend to move into a
    facility by choice, oftentimes to be in a metropolitan area that
    is closer to their adult children. According to ASHA, there are
    approximately 6,200 independent living facilities nationwide
    with approximately 723,300&nbsp;units.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B>Assisted living </B>is designed for seniors who seek housing
    with supportive care and services, including assistance with
    activities of daily living, memory care and other services (for
    example, housekeeping, meals and activities). Assisted living
    residents tend to move into a facility both by choice and by
    necessity. According to ASHA, there are approximately 7,270
    assisted living facilities nationwide with approximately 543,450
    beds.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B>Memory care </B>is designed for seniors who suffer from
    Alzheimer&#146;s disease or other forms of dementia or memory
    impairment. Memory care facilities are designed to provide a
    safe and secure physical environment while providing assisted
    living services together with programming appropriate to the
    needs of those with Alzheimer&#146;s disease or other forms of
    dementia.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B>Skilled nursing </B>is designed for seniors whose care needs
    require 24-hour skilled nursing services or who are receiving
    certain medical services.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B>Continuing Care Retirement Communities </B>offer a variety of
    living arrangements and services to accommodate residents of
    varying levels of physical ability and health. The goal of a
    CCRC is to accommodate changing lifestyle preferences and health
    care needs. Generally, CCRCs make independent living, assisted
    living and skilled nursing available all on one campus location.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In all of these settings, seniors may elect to bring in
additional care and services as needed, such as home-health care
(except in a skilled nursing setting) and end-of-life or hospice
care.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior living industry is highly fragmented and
characterized predominantly by numerous local and regional
operators. Senior living providers may operate freestanding
independent living, assisted living or skilled nursing
residences, or communities that feature a combination of
options, such as CCRCs. The level of care and services offered
by providers varies along with the size of communities, number
of residents served and design of facilities (for example,
purpose-built communities or refurbished structures).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Industry Trends</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior living industry has evolved to meet the growing
demand for senior care generated by an aging population
demanding new and better housing alternatives. We believe that
we are well positioned to capitalize on a number of trends in
the senior living industry, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>An increasing number of seniors with longer life
    expectancies and financial resources to support a private pay
    model.</I></B> According to the U.S.&nbsp;Census Bureau, the
    population greater than 65&nbsp;years old is expected to
    increase to approximately 20% of the overall
    U.S.&nbsp;population during the next 25&nbsp;years, from
    approximately 12% in 2000. As life expectancy continues to
    increase and the elderly continue to become a higher percentage
    of</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">63

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<FONT face="helvetica,arial">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    the total U.S.&nbsp;population, we believe the demand for
    service-based senior housing will increase. In addition, seniors
    in the areas in which we operate tend to have a significant
    amount of assets generated from savings, pensions and, due to
    strong national housing markets, the sale of private homes. We
    believe seniors increasingly will have the ability to afford
    senior living services.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Fragmentation in the industry provides significant
    acquisition and consolidation opportunities.</I></B> The senior
    living industry&#146;s independent living and assisted living
    segments are large and fragmented, characterized predominantly
    by numerous local and regional operators. According to ASHA the
    top five operators of senior living facilities measured by total
    resident capacity control only 7% of the total capacity. In
    addition, according to ASHA, only the top 5 managers operate
    more than 14,000 senior living units/beds. We believe that this
    fragmentation provides significant acquisition and consolidation
    opportunities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Majority of independent and assisted living revenue growth
    generated from private pay sources.</I></B> Because we generate
    over 98% of our revenues from private pay customers, our
    resident fees are not constrained by regulatory or other
    governmental considerations. Independent and assisted living
    services are not generally reimbursable under government
    reimbursement programs such as Medicare and Medicaid and thus we
    have limited exposure to reimbursement risk.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Favorable and improving supply and demand balance.</I></B>
    We believe that the number of vacant senior living units has
    declined steadily over the past several years. According to
    ASHA, the number of new senior housing units identified as under
    construction has declined approximately 60% from
    65,879&nbsp;units in 1999 to 26,355&nbsp;units in 2004. Combined
    with increasing life expectancies, we believe there is a
    favorable and improving supply and demand balance.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">64

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<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='111'></A>
</DIV>

<!-- link1 "BUSINESS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are the third largest operator of senior living facilities in
the United States based on total capacity, with over
380&nbsp;facilities in 32&nbsp;states and the ability to serve
over 30,000 residents. We offer our residents access to a full
continuum of services across all sectors of the senior living
industry. As of June&nbsp;30, 2005, we operated 81 independent
living facilities with 14,619&nbsp;units, 291 assisted living
facilities with 12,342 beds, eight continuing care retirement
communities, or CCRCs, with 3,238&nbsp;units/beds (including 825
resident-owned cottages on our CCRC campuses managed by us) and
one skilled nursing facility with 82&nbsp;units/beds. The
majority of our units/beds are located in campus settings or
facilities containing multiple services, including CCRCs. As of
June&nbsp;30, 2005, our facilities were on average&nbsp;88.1%
occupied. We generate over 98% of our revenues from private pay
customers, which limits our exposure to government reimbursement
risk. In addition, we control the operating economics of our
facilities through property ownership and long-term leases. We
believe we operate in the most attractive sectors of the senior
living industry with significant opportunities to increase our
revenues through providing a combination of housing, hospitality
services and health care services. For the three months ended
March&nbsp;31, 2005, 13.7% of our revenues were generated from
owned facilities, 85.8% from leased facilities and 0.5% from
management fees from facilities we operate on behalf of third
parties and affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were formed in June 2005 for the purpose of combining two
leading senior living operating companies, Brookdale Living
Communities, Inc., or BLC, and Alterra Healthcare Corporation,
or Alterra. BLC and Alterra have been operating independently
since 1986 and 1981, respectively. Since December 2003, BLC and
Alterra have been under the common control of Fortress. Fortress
is not selling any shares of common stock in this offering.
Following this offering, Fortress will own
43,157,000&nbsp;shares, or over 60%, of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We plan to grow our revenue and operating income through a
combination of: (i)&nbsp;organic growth in our existing
portfolio; (ii)&nbsp;acquisitions of additional operating
companies and facilities; and (iii)&nbsp;the realization of
economies of scale, including those created by the BLC and
Alterra combination. Given the size and breadth of our
nationwide platform, we believe that we are well positioned to
invest in a broad spectrum of assets in the senior living
industry. Since January 2001, we have begun leasing or acquired
the ownership or management of 52 senior living facilities with
approximately 11,000&nbsp;units/beds. In 2005, we acquired the
ownership or management of 16 senior living facilities with
4,266&nbsp;units/beds (including 825&nbsp;resident-owned
cottages on our CCRC campuses managed by us) and an additional
facility with 233&nbsp;units/beds, which is currently under
contract for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our facilities are predominantly concentrated in the independent
and assisted living portion of the senior housing continuum as
depicted below:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SENIOR HOUSING CONTINUUM OF CARE</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10687y1068700.gif" alt="(SENIOR HOUSING CHART)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the senior living industry is the preferred
alternative to meet the growing demand for a cost-effective
residential setting in which to care for the elderly who cannot,
or as a lifestyle choice choose not to, live independently due
to physical or cognitive frailties and who may,
</DIV>

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as a result, require assistance with some of the activities of
daily living or the availability of nursing or other medical
care. Housing alternatives for seniors include a broad spectrum
of senior living service and care options, including independent
living, assisted living, memory care and skilled nursing care.
More specifically, senior living consists of a combination of
housing and the availability of 24-hour a day personal support
services and assistance with certain activities of daily living.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2004, and the three months
ended March&nbsp;31, 2005, we generated:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma(1)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">($ in millions)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">790.2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility Operating Income(2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290.7</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net Income (Loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjusted EBITDA(3)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">81.9</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash Earnings(4)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7.9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24.2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
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<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    See &#147;Summary Combined Financial Information&#148; and
    &#147;Unaudited Pro Forma Condensed Financial Information&#148;
    for a description of the adjustments included in the pro forma
    results.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Facility Operating Income is a non-GAAP financial measure we use
    in evaluating our performance. See &#147;Summary Combined
    Financial Information&#148; for a computation of this measure
    and &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&nbsp;&#151; Non-GAAP
    Financial Measures&nbsp;&#151; Facility Operating Income&#148;
    for a detailed description of why we believe such measure is
    useful.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Adjusted EBITDA is a non-GAAP financial measure we use in
    evaluating our performance. See &#147;Summary Combined Financial
    Information&#148; for a reconciliation of this measure to net
    income and &#147;Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations&nbsp;&#151;
    Non-GAAP Financial Measures&nbsp;&#151; Adjusted EBITDA&#148;
    for a detailed description of why we believe such measure is
    useful.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Cash Earnings is a non-GAAP financial measure we use in
    evaluating our performance. See &#147;Summary Combined Financial
    Information&#148; for a reconciliation of this measure to net
    income and &#147;Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations&nbsp;&#151;
    Non-GAAP Financial Measures&nbsp;&#151; Cash Earnings,&#148; for
    a detailed description of why we believe such measure is useful.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Growth Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our objective is to increase our revenues, Adjusted EBITDA, Cash
Earnings and dividends per share of our common stock, while
remaining one of the premier senior living providers in the
United States. Key elements of our strategy to achieve these
objectives include:
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Organic growth in our existing operations.</I></B> We plan
    to grow our existing operations by:</TD>
</TR>

</TABLE>

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<TR>
    <TD width="4%"></TD>
    <TD width="5%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;</TD>
    <TD align="left">
    increasing revenues through a combination of occupancy growth
    and resident fee increases as a result of growing demand for
    senior living facilities. For the 343 facilities we owned,
    leased or managed since 2003 (excluding four development
    facilities), our facility operating income has increased
    approximately 7.0% on an annualized basis and, including the
    four development facilities, our facility operating income has
    increased approximately 8.0% on an annualized basis;&nbsp;and</TD>
</TR>

</TABLE>

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<TR>
    <TD width="4%"></TD>
    <TD width="5%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149;&nbsp;</TD>
    <TD align="left">
    taking advantage of our sophisticated operating and marketing
    expertise to retain existing residents and attract new residents
    to our facilities. As of June&nbsp;30, 2005, our facilities were
    on average&nbsp;88.1% occupied.</TD>
</TR>

</TABLE>

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Growth through operating efficiencies.</I></B> We intend
    to utilize our expertise and size to capitalize on economies of
    scale resulting from our national platform. Our geographic
    footprint and centralized infrastructure provide us with a
    significant operational advantage over local and regional
    operators of senior living facilities. As a result, we are able
    to achieve economies of scale with respect to the goods and
    services we purchase. In connection with the combination of BLC
    and Alterra, we have negotiated new contracts for food,
    insurance and other services. In addition, we will reduce the
    size of our corporate workforce through a consolidation of
    corporate functions such as accounting, finance, human resources
    and legal. Collectively, we expect these initiatives to result
    in recurring operating and general and administrative expense
    savings, net of additional recurring costs expected to be
    incurred as a public company, of between approximately
    $13.0&nbsp;million and $15.0&nbsp;million pet year. We began to
    realize these savings upon the completion of our formation
    transactions
    in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005.
    See &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&nbsp;&#151; Formation
    Transaction.&#148; As we continue to grow both organically and
    through acquisitions, we expect to have further opportunities to
    realize other synergies and operating efficiencies.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Growth through the acquisition and consolidation of asset
    portfolios and other senior living companies.</I></B> We plan to
    take advantage of the fragmented independent living and assisted
    living sectors by selectively purchasing existing operating
    companies and facilities. Since January 2001, we have begun
    leasing or acquired the ownership or management of 52 senior
    living facilities with approximately 11,000&nbsp;units/beds. In
    2005, we acquired the ownership or management of 16&nbsp;senior
    living facilities with 4,266&nbsp;units/beds (including 825
    resident-owned cottages on our CCRC campuses managed by us) and
    an additional facility with 233&nbsp;units/beds, which is
    currently under contract for sale. Our acquisition strategy will
    continue to focus primarily on facilities where we can improve
    service delivery, occupancy rates and cash flow. We expect to
    finance our acquisitions, on a long-term basis, by using
    primarily equity issuances combined with fixed- and
    floating-rate debt.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Expansion of existing facilities where economically
    advantageous.</I></B> Certain of our facilities with stabilized
    occupancies and excess demand in their respective markets may
    benefit from additions and expansions (which additions and
    expansions may be subject to landlord, lender and other third
    party consents) offering increased capacity, as well as
    additional levels of service for residents requiring higher
    levels of care. Furthermore, the expansion of existing
    facilities allows us to enhance our facility-level return on
    investment by increasing the revenue base at a facility with
    lower incremental operating costs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competitive Strengths</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe our nationwide network of senior living facilities is
well positioned to benefit from the growth and increasing demand
in the industry. Some of our most significant competitive
strengths are:
</DIV>

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Skilled management team with extensive experience.</I></B>
    Our senior management team has extensive experience in
    acquiring, operating and managing a broad range of senior living
    assets. Our chairman and top five executive officers have over
    115&nbsp;years of combined experience in the senior living,
    hospitality and real estate industries. In addition, as
    stockholders, our management team is incentivized to continue to
    grow our business. Following this offering, our senior
    management team will own
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our
    common stock on a fully diluted basis.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Proven track record of successful acquisitions.</I></B>
    Since January 2001, we have begun leasing or acquired the
    ownership or management of 52 senior living facilities with
    approximately 11,000&nbsp;units/beds. Our experience in
    acquiring senior living facilities enables</TD>
</TR>

</TABLE>

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    us to consider a wide range of acquisition targets in the senior
    living industry. In addition, we believe our expertise in
    integrating these facilities onto our operating platform enables
    us to acquire facilities while causing minimal disruption to
    either the residents or facility operating staff.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>High-quality purpose-built facilities.</I></B> We operate
    a nationwide base of over 380 purpose-built facilities in
    32&nbsp;states, including 66&nbsp;facilities in eight of the top
    ten SMSAs. The average age of our facilities is 9.7&nbsp;years.
    We have experienced significant facility operating income growth
    and occupancy growth over the past year. Our facility operating
    income increased 16.4%, from $54.8&nbsp;million for the three
    months ended March&nbsp;31, 2004 to $63.8&nbsp;million for the
    three months ended March&nbsp;31, 2005, and our occupancy rate
    increased 0.7%, from 86.8% as of March&nbsp;31, 2004 to 87.5% as
    of March&nbsp;31, 2005. For the 347 and 343 (excluding four
    development facilities) facilities we have operated since
    January&nbsp;1, 2004, our facility operating income increased
    8.7% and 7.4%, respectively, for the three months ended
    March&nbsp;31, 2005, as compared to the three months ended
    March&nbsp;31, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>Ability to provide a broad spectrum of care.</I></B> Given
    our diverse mix of independent and assisted living facilities
    and CCRCs, we are able to meet a wide range of our
    customers&#146; needs. We believe that we are one of the few
    companies in the senior living industry with this capability. We
    believe that our multiple product offerings create marketing
    synergies and cross-marketing opportunities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <B><I>The size of our business allows us to realize cost
    efficiencies.</I></B> We are the third largest operator of
    senior living facilities in the United States based on total
    capacity. The size of our business allows us to realize cost
    savings in the purchasing of goods and services and also allows
    us to achieve increased efficiencies with respect to various
    corporate functions, most of which have yet to be realized in
    our operating results given the recent combination of BLC and
    Alterra
    in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005.
    In addition, our size and broad geographical footprint gives us
    an advantage in executing our acquisition strategy. When we
    acquire a facility in a location where we already operate, we
    are able to integrate the additional facility with limited or no
    incremental cost. This allows us to acquire assets more
    efficiently and to better compete against other operators for
    acquisitions with a more geographically limited presence.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>History</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a holding company formed in June 2005 for the purpose of
combining, through a series of mergers, two leading senior
living operating companies, BLC and Alterra, which have been
operating independently since 1986 and 1981, respectively.
Fortress has been the majority owner of BLC since September 2000
and of Alterra since December 2003. In addition, we recently
acquired, through affiliates of Fortress, the ownership or
management of 16 additional senior living facilities, not
including one facility currently under contract for sale. In
June and July 2005, FIT REN LLC, an affiliate of Fortress, or
FIT REN, purchased eight senior living facilities and one senior
living facility, respectively, consisting of
1,261&nbsp;units/beds from affiliates of Prudential Financial,
Inc. for an aggregate purchase price of approximately
$282.4&nbsp;million, before closing costs. In April 2005,
Fortress CCRC Acquisition LLC (formerly known as Fortress NBA
Acquisition LLC), an affiliate of Fortress, or Fortress CCRC,
purchased eight senior living facilities with
3,238&nbsp;units/beds from The National Benevolent Association
of the Christian Church (Disciples of Christ), or the NBA, as
debtor-in-possession under Chapter&nbsp;11 of the
U.S.&nbsp;bankruptcy code for an aggregate purchase price of
approximately $181.4&nbsp;million, before closing costs. Of
these eight facilities, Fortress CCRC sold one on July&nbsp;1,
2005 for $2.5&nbsp;million, and one is under contract for sale.
Subsequent to the acquisition of these facilities by FIT REN and
Fortress CCRC, the facilities have been managed by affiliates of
BLC. As described below, we acquired ownership of the properties
purchased by FIT REN and Fortress CCRC
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005
at a price equal to the purchase price for which each of FIT REN
and Fortress CCRC acquired the respective facilities. It is our
intention to continue to own and manage the nine facilities
originally purchased by FIT REN and six facilities originally
purchased
</DIV>

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<DIV align="left" style="font-size: 10pt;">
by Fortress CCRC, and to manage the facility that Fortress CCRC
sold on July&nbsp;1, 2005.
In &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
the following series of transactions occurred:
</DIV>

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    A wholly-owned subsidiary of ours merged with and into BLC. In
    the merger, the stockholders of BLC, including affiliates of
    Fortress, an affiliate of Capital Z Partners and certain members
    of our management, received an aggregate of
    20,000,000&nbsp;shares of our common stock, representing 34.5%
    of our outstanding common stock prior to this offering, for all
    of their outstanding common stock of BLC. As a result of the
    merger, BLC became our wholly-owned subsidiary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Alterra purchased from Fortress Investment Trust&nbsp;II, an
    affiliate of Fortress, all of the outstanding membership
    interests of FIT REN, which had recently acquired certain senior
    living facilities from Prudential Financial, Inc., as described
    in &#147;&#151;&nbsp;Acquisition and History of Alterra
    Healthcare Corporation,&#148; for an aggregate purchase price of
    approximately $282.4&nbsp;million before closing costs
    (including the assumption of approximately $171.0&nbsp;million
    of debt). As a result of the purchase, FIT REN became a
    wholly-owned subsidiary of Alterra and Fortress Investment
    Trust&nbsp;II became a member of FEBC-ALT Investors LLC, or
    FEBC-ALT Investors, Alterra&#146;s indirect parent company. In
    connection with the merger of FEBC-ALT Investors described
    below, Fortress Investment Trust&nbsp;II received
    11,750,000&nbsp;shares of our common stock, representing 20.3%
    of our outstanding common stock prior to this offering, for its
    interest in FIT REN.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    A wholly-owned subsidiary of ours merged with and into FEBC-ALT
    Investors, Alterra&#146;s indirect parent company. In the
    merger, FIT-ALT Investor LLC, Fortress Investment Trust&nbsp;II,
    Emeritus, NW Select and certain members of our management, each
    of which was a member of FEBC-ALT Investors, received an
    aggregate of 29,750,000&nbsp;shares of our common stock,
    representing 51.3% of our outstanding common stock prior to this
    offering, for all of the outstanding membership interests of
    FEBC-ALT Investors. FIT-ALT Investor LLC and Fortress Investment
    Trust II are affiliates of Fortress. As a result of the merger,
    Alterra became our wholly-owned subsidiary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    A wholly-owned subsidiary of ours merged with and into Fortress
    CCRC. In the merger, Fortress Investment Trust&nbsp;II received
    an aggregate of 8,250,000&nbsp;shares of our common stock,
    representing 14.2% of our outstanding common stock prior to this
    offering, for all of the outstanding membership interests of
    Fortress CCRC. Fortress CCRC owns, through its wholly-owned
    subsidiaries, seven senior living facilities, including one
    facility currently under contract for sale. As a result of the
    merger, Fortress CCRC became our wholly-owned subsidiary.</TD>
</TR>

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On August&nbsp;5, 2005, BLC granted 988&nbsp;shares of its stock
and FEBC-ALT Investors granted 3.3% of its membership interests
to certain members of our management, which shares and
percentage interests are subject to substantial risk of
forfeiture until the occurrence of certain events, as specified
in the applicable restricted stock or restricted securities
award agreements. In accordance with the terms of the plans, a
portion of these securities will no longer be subject to a risk
of forfeiture upon the consummation of this offering. In
addition, the remaining securities will vest over a five-year
period following the issuance if the executive remains
continuously employed by the Company. Securities that are
subject to risk of forfeiture may not be sold or transferred.
See &#147;Business&nbsp;&#151; Equity Incentive
Plans&nbsp;&#151; Employee Restricted Stock Plans.&#148; In
connection with the merger transactions described above, these
shares were automatically converted into an aggregate of
2,577,652&nbsp;shares of our common stock, representing 4.4% of
our outstanding common stock prior to this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of these formation transactions, prior to the
consummation of this offering, all of our outstanding common
stock is held by FIT-ALT Investor LLC, Fortress Investment
Trust&nbsp;II, Fortress Brookdale Acquisition LLC, or FBA, each
of which is an affiliate of Fortress, Health Partners, which is
an affiliate of Capital&nbsp;Z Partners, Emeritus, NW Select,
and certain members of our management. Each of Emeritus
Corporation and NW Select LLC is selling all of the shares of
our common stock it
</DIV>

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<DIV align="left" style="font-size: 10pt;">
owns in this offering. Fortress and its affiliates are not
selling any of the shares of our common stock that they own in
this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
See &#147;Certain Relationships and Related Party
Transactions&#148; for a more detailed description of our
relationships with these stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Acquisition and History of Brookdale Living Communities,
Inc.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
a wholly-owned subsidiary of ours merged with and into BLC,
resulting in the issuance of an aggregate of
20,000,000&nbsp;shares of our common stock to the previous
holders of all of the outstanding common stock of BLC. As a
result of this transaction, BLC became our wholly-owned
subsidiary and (1)&nbsp;FBA, an affiliate of Fortress and the
former holder of a majority of the outstanding common stock of
BLC, and (2)&nbsp;Health Partners, a former member of FBA,
became significant stockholders of ours. See &#147;Principal and
Selling Stockholders&#148; and &#147;Certain Relationships and
Related Party Transactions.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June and July of 2005, subsidiaries of BLC entered into
management agreements/operating leases to operate eight senior
living facilities and one senior living facility, respectively,
consisting of 1,261&nbsp;units/beds, which we refer to as the
Prudential Portfolio. See &#147;&#151;&nbsp;Acquisition and
History of Alterra Healthcare Corporation&#148; for a
description of the acquisition history of the Prudential
Portfolio. Fortress and BLC received regulatory authorization to
operate these facilities in June and July 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2005, subsidiaries of BLC entered into management
agreements to operate eight facilities, six of which we own, one
of which we sold and still manage and one of which is currently
under contract for sale and which we will not continue to manage
after the sale is consummated, consisting of
3,238&nbsp;units/beds, in the Fortress CCRC Portfolio. See
&#147;&#151;&nbsp;Acquisition and History of Fortress CCRC
Portfolio&#148; for a description of the acquisition history of
the Fortress CCRC Portfolio. Fortress and BLC received
regulatory licenses required to operate these facilities in
April 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2004, Provident Senior Living Trust, or Provident, a
real estate investment trust, acquired 21 senior living
facilities from BLC through a stock acquisition, for a total
purchase price of approximately $742.4&nbsp;million (including
the assumption of approximately $433.6&nbsp;million of
non-recourse and limited recourse property-level and other
debt). BLC currently leases and operates all of the facilities
that it sold to Provident pursuant to long-term operating leases
and management agreements. See
&#147;&#151;&nbsp;Leases&nbsp;&#151; BLC&#146;s Master Lease
Arrangements with Provident.&#148; In October 2004, BLC paid a
dividend of $254.6&nbsp;million to all of its stockholders,
which represented a return of capital. The dividend was funded
with a portion of the proceeds from the Provident transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2004, BLC entered into management agreements to
operate nine facilities consisting of more than
1,900&nbsp;units/beds owned by Cypress Senior Living, which we
refer to as the Town Village Portfolio. The Town Village
Portfolio consists of entirely independent living facilities,
ranging in size from 176 to 276&nbsp;units/beds each. The
facilities are located in the metro areas of Detroit, Kansas
City, Memphis, Dallas, Birmingham, Fort&nbsp;Worth, and Tulsa,
all of which opened in the last three years, and Oklahoma City,
which opened in December 2004.
</DIV>

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During the first quarter of 2004, the limited partnerships that
owned 14 facilities, in which subsidiaries of BLC held general
and limited partnership interests, sold those facilities to
Ventas Realty, Limited Partnership, or Ventas, for approximately
$114.6&nbsp;million. Ventas also acquired another facility from
a third party in a separate transaction. Simultaneously with
such sales, wholly-owned subsidiaries of BLC, or the Ventas
Tenants, entered into and became the tenants under a master
lease with Ventas pursuant to which the Ventas Tenants currently
lease 13 facilities. Two additional facilities are leased to the
Ventas Tenants pursuant to individual leases substantially
similar to the master lease. BLC has guaranteed the leases for
the full and prompt payment and performance of all of Ventas
Tenants&#146; obligations thereunder. The guaranty requires that
BLC maintain a net worth of not less than $100.0&nbsp;million
(as defined). See &#147;&#151;&nbsp;Leases&nbsp;&#151; Ventas
Lease Arrangement with BLC.&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2002, BLC purchased the following three facilities
consisting of 643&nbsp;units/beds for approximately
$134.7&nbsp;million, which it had previously developed and
managed for third party owners: The Heritage at Gaines Ranch, a
208-unit/beds facility located in Austin, Texas; The Heritage of
Southfield, a 217-unit/beds facility located in Southfield,
Michigan; and The Devonshire of Mt. Lebanon, a 218-unit/beds
facility located in Mt. Lebanon (Pittsburgh), Pennsylvania. The
total purchase price included cash of $41,000 plus the
assumption of all liabilities, including approximately
$76.1&nbsp;million of first mortgage loans and approximately
$13.4&nbsp;million of mezzanine financing provided by a
subordinate lender. At the date of purchase, the
$76.1&nbsp;million of first mortgage loans and
$13.4&nbsp;million of mezzanine financing, which were partially
guaranteed by BLC, were in default. BLC reached an agreement
with the lenders for BLC to repay the loans at an agreed-upon
amount and for the lenders to forbear on all claims until
December&nbsp;31, 2003 and February&nbsp;1, 2004, respectively.
In September 2003, BLC formed Brookdale Senior Housing, LLC, or
the NML Joint Venture, a joint venture with an affiliate of the
Northwestern Mutual Life Insurance Company, or Northwestern, and
effectively sold 75% of its interest in the Southfield and Mt.
Lebanon facilities to the NML Joint Venture. The NML Joint
Venture owns the Southfield and Mt. Lebanon facilities and was
capitalized with $66.3&nbsp;million of cash, of which $144,000
was contributed by BLC, and the balance of which was contributed
by Northwestern in the form of $35.8&nbsp;million of equity and
$30.4&nbsp;million of first mortgage financing. The loans are
payable as interest only loans at the rate of 6.75% through
September&nbsp;30, 2008, and 7.25% through maturity on
October&nbsp;1, 2009. In addition, Northwestern made a
$16.4&nbsp;million first mortgage loan to the owner of The
Heritage of Gaines Ranch, payable as an interest only loan at
6.75% through September&nbsp;30, 2008, and 7.25% through
maturity on October&nbsp;1, 2009, and the NML Joint Venture made
a $12.7&nbsp;million mezzanine loan to the owner of The Heritage
of Gaines Ranch, payable at the rate of all available cash flow
and appreciation in the facility. In connection with the sale of
its interests in the Southfield and Mt. Lebanon facilities, BLC
received $51.6&nbsp;million, which resulted in a loss on the
sale of $24.5&nbsp;million. BLC used the proceeds to repay the
existing first mortgage and mezzanine loans and recognized a
gain on extinguishment of debt of $12.5&nbsp;million, net of
costs. Subsidiaries of BLC manage each of these facilities for a
fee equal to 5% of gross revenues. Under certain limited
circumstances, BLC&#146;s management of these facilities can be
terminated by Northwestern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2001, BLC entered into an agreement to purchase
seven facilities from AIMCO consisting of 1,477&nbsp;units/beds,
or the Chambrel Portfolio, for which it made earnest money
deposits in the aggregate amount of $4.0&nbsp;million. The
deposits were funded with the proceeds of advances made to BLC
by Capstead Mortgage Corporation, or Capstead, a publicly traded
company in which an affiliate of Fortress held an interest. See
&#147;Certain Relationships and Related Party
Transactions.&#148; In connection with the closing, BLC assigned
its rights under the purchase and sale agreements to
subsidiaries of Capstead and entered into seven operating leases
with subsidiaries of Capstead. See
&#147;&#151;&nbsp;Leases&nbsp;&#151; Capstead Lease Arrangement
with BLC.&#148; On October&nbsp;31, 2002, Capstead sold the
Chambrel at Windsong Care Center in Akron, Ohio, an 83 bed
skilled nursing center, and terminated the related operating
lease. The net cost of the remaining six facilities, consisting
of 1,394&nbsp;units/beds, was approximately $148.7&nbsp;million
(including the assumption of approximately $120.6&nbsp;million
of debt).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2001, BLC acquired a 45% interest in GFB-AS
Investors, LLC, or GFB, for approximately $5.7&nbsp;million.
GFB, in turn, acquired the equity interests in the general
partners of various limited partnerships, or GC LPs, each of
which owns one senior living facility, and each of which were
previously owned or controlled by affiliates of Grand Court
Lifestyles, Inc., together with management contract rights and
certain loans receivable. A wholly-owned subsidiary of BLC
entered into management consulting agreements with each of the
GC LPs. The total initial investment in GFB was approximately
$12.8&nbsp;million, of which BLC&#146;s share was approximately
$5.7&nbsp;million and was funded from the proceeds of a loan
made by an affiliate of Fortress. In September 2002, the members
of GFB contributed approximately $2.6&nbsp;million to fund
additional purchases of limited partnership interests in certain
GC LPs and to provide loans to various partnerships, of which
BLC&#146;s share was approximately $1.2&nbsp;million. BLC&#146;s
share was funded by a loan from an affiliate of
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Fortress. In May 2003, BLC purchased the remaining 55% interest
in GFB for net cash consideration of approximately
$10.5&nbsp;million, which was funded by a loan from the
stockholders of FBA. See &#147;Certain Relationships and Related
Party Transactions.&#148; During the first quarter of 2004, 14
of the limited partnerships sold the facilities that they owned
to Ventas and, in connection with such sales, certain
subsidiaries of BLC entered into and became the tenants under
leases with Ventas. For a more detailed description of the
Ventas transaction, see &#147;&#151;&nbsp;Leases&nbsp;&#151;
Ventas Lease Arrangement with BLC.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BLC completed an initial public offering of its common stock in
May 1997. BLC remained a public company until September 2000,
when it was acquired pursuant to a tender offer by FBA, a joint
venture owned by an affiliate of Fortress and an affiliate of
Capital Z Partners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Acquisition and History of Alterra Healthcare
Corporation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
a wholly-owned subsidiary of ours merged with and into FEBC-ALT
Investors, resulting in the issuance of an aggregate of
29,750,000&nbsp;shares of our common stock for all of the
outstanding membership interests of FEBC-ALT Investors. Alterra
is an indirect wholly-owned subsidiary of FEBC-ALT Investors
and, as a result of this transaction, Alterra became our
indirect wholly-owned subsidiary. FIT-ALT Investor, Fortress
Investment Trust&nbsp;II, Emeritus and NW Select (each a former
member of FEBC-ALT Investors) each became significant
stockholders of ours. Each of FIT-ALT Investor LLC and Fortress
Investment Trust&nbsp;II is an affiliate of Fortress. Each of
Emeritus and NW Select is selling all of its shares in this
offering. See &#147;Principal and Selling Stockholders&#148; and
&#147;Certain Relationships and Related Party Transactions.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June and July 2005, FIT REN, an affiliate of Fortress,
purchased eight senior living facilities and one senior living
facility, respectively, consisting of 1,261&nbsp;units, or the
Prudential Portfolio, from affiliates of Prudential Financial,
Inc. for an aggregate purchase price of approximately
$282.4&nbsp;million, before closing costs. Prior to our
acquisition of Alterra, Alterra purchased from Fortress
Investment Trust&nbsp;II, an affiliate of Fortress, all of the
outstanding membership interests in FIT REN for an aggregate
purchase price of approximately $282.4&nbsp;million (including
the assumption of approximately $171.0&nbsp;million of debt). As
a result of the purchase, FIT REN became a wholly-owned
subsidiary of Alterra and Fortress Investment Trust&nbsp;II
became a member of FEBC-ALT Investors. In connection with the
FEBC-ALT Investors merger described above, Fortress Investment
Trust&nbsp;II received 11,750,000&nbsp;shares of our common
stock, and became a significant stockholder of ours. See
&#147;Principal and Selling Stockholders&#148; and &#147;Certain
Relationships and Related Party Transactions.&#148; Subsidiaries
of BLC operate each of the facilities in the Prudential
Portfolio pursuant to management agreements with the property
owners. See &#147;&#151;&nbsp;Acquisition and History of
Brookdale Living Communities, Inc.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2005, FIT-ALT Investor, an affiliate of Fortress,
purchased membership interests representing an approximately 25%
membership interest in FEBC-ALT Investors from Emeritus and NW
Select, for an aggregate purchase price of $50.0&nbsp;million.
In connection with this transaction, FEBC-ALT Investors paid a
dividend of $20.0&nbsp;million to FIT-ALT Investor, its sole
Class&nbsp;A Preferred stockholder. FIT-ALT Investor used the
proceeds of the dividend to pay a portion of the purchase price.
See &#147;Certain Relationships and Related Party
Transactions&#148; for a more detailed description of this
transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the fourth quarter of 2004, Provident acquired 47
assisted living facilities from Alterra through the acquisition
of 100% of the outstanding capital stock of certain Alterra
subsidiaries for a total purchase price of approximately
$240.4&nbsp;million (including the assumption of approximately
$49.5&nbsp;million of non-recourse and limited recourse
property-level debt). Alterra currently leases and operates all
of the facilities that it sold to Provident pursuant to
long-term operating leases. See
&#147;&#151;&nbsp;Leases&nbsp;&#151; Provident&#146;s Master
Lease Arrangements with Alterra.&#148; In October 2004, Alterra
paid a dividend of $50.0&nbsp;million to FIT-ALT Investor, its
sole Class&nbsp;A Preferred stockholder, which represented a
partial return of capital, and included repayment of
approximately $17.2&nbsp;million of debt
</DIV>

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<DIV align="left" style="font-size: 10pt;">
owed to Fortress, including accrued interest. The dividend was
funded with a portion of the proceeds received from the
Provident transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, AHC Purchaser Inc., a wholly-owned subsidiary
of Alterra, and Merrill Lynch Capital entered into a series of
agreements through which Alterra borrowed $72.5&nbsp;million to
refinance two other debt arrangements. The financing is secured
by 21 facilities with a capacity for 860 residents. See
&#147;Description of Indebtedness&nbsp;&#151; Merrill Lynch
Mortgage Loan.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February 2003, ALS-Venture&nbsp;II, Inc., a now inactive
subsidiary of Alterra, and Wynwood of Chapel Hill, LLC, sold 25
assisted living properties pursuant to a Purchase and Sale
Agreement to SNH ALT Leased Properties Trust, or SNH, for
approximately $61.0&nbsp;million. Subsequently, AHC Trailside,
Inc., a subsidiary of Alterra, entered into and became the
tenant at these 25 assisted living facilities pursuant to a
lease with SNH. &#147;See&nbsp;&#151; Leases&nbsp;&#151;
SNH&#146;s Sale-Leaseback Arrangement with Alterra.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra completed an initial public offering of its common stock
in August 1996 and remained a public company until 2003. In
January 2003, in order to facilitate and complete its ongoing
restructuring initiatives, Alterra filed a voluntary petition
for bankruptcy under Chapter&nbsp;11 of the U.S.&nbsp;Bankruptcy
Code. Alterra emerged from bankruptcy in December 2003 when it
was acquired and recapitalized by FEBC-ALT Investors, a joint
venture that included an affiliate of Fortress. Since 2001, in
connection with its bankruptcy and reorganization efforts,
Alterra has sold more than 200 facilities and parcels of land to
third parties for in excess of $150.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2002, individual leases on 35 facilities that were
previously leased by Alterra from LTC Properties, Inc., or LTC,
and its affiliates were either terminated or amended and
restated, and Alterra entered into four separate master leases
with LTC and its affiliates with respect to the facilities. See
&#147;&#151;&nbsp;Leases&nbsp;&#151; LTC&#146;s Master Lease
Arrangement with Alterra.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2002, 43 facilities with a capacity for 1,526 residents
that were previously leased by affiliates of Alterra from
affiliates of Meditrust (La&nbsp;Quinta Properties, Inc.), or
Meditrust, were conveyed by Meditrust to JER/ NHP Senior Living
Texas, L.P., JER/ NHP Senior Living Wisconsin, LLC, JER/ NHP
Senior Living Kansas, Inc., and JER/ NHP Senior Living
Acquisition, LLC, collectively, JER I. The Meditrust-Alterra
leases were terminated and the Alterra affiliates entered into a
single master lease with JER&nbsp;I with respect to those
facilities. In October 2002, three additional facilities that
were previously mortgaged to Key Bank and six facilities that
were previously mortgaged to Washington Mutual were conveyed by
affiliates of Alterra to JER/ NHP Senior Living Acquisition,
LLC, or JER&nbsp;II. Simultaneous with the conveyances,
affiliates of JER&nbsp;II leased these residences to ALS
Leasing, Inc., a wholly-owned subsidiary of Alterra, under a
single master lease. See &#147;&#151;&nbsp;Leases&nbsp;&#151;
JER&nbsp;I&#146;s Master Lease Arrangement with Alterra&#148;
and &#147;&#151;&nbsp;Leases&nbsp;&#151; JER&nbsp;II&#146;s
Master Lease Arrangement with Alterra.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2002, Alterra entered into a single master lease with
Nationwide Health Properties, Inc., or NHP, and its affiliates
with respect to 57 facilities, which included six facilities
that were previously leased by Alterra from Meditrust. Of the
original NHP-Alterra portfolio, six additional facilities were
not included in the master lease due to underlying ground leases
or bond-related indebtedness, and Alterra is obligated to amend
the master lease to add these facilities when consents are
obtained. One of the six facilities was added to the master
lease in June 2005. Since the time of entry into the master
lease, six facilities have been sold. As a result, 52 facilities
remain under the master lease. See
&#147;&#151;&nbsp;Leases&nbsp;&#151; NHP&#146;s Master Lease
Arrangement with Alterra.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July 2001, individual leases on 38 residences that were
previously leased by Alterra from Health Care REIT, Inc., or
HCR, and its affiliates were terminated, and Alterra entered
into a single master lease with HCR and its affiliates with
respect to 36 of the residences. In subsequent amendments, ten
additional properties with a capacity for 424 residents were
refinanced out of unaffiliated lender/lessor portfolios and
added to the master lease, and one property originally included
in the master lease was sold and removed from the master lease.
As a result, Alterra currently leases 45 facilities from HCR and
its affiliates under the master lease. See
&#147;&#151;&nbsp;Leases&nbsp;&#151; Health Care REIT&#146;s
Master Lease Arrangement with Alterra.&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2001, Alterra negotiated a series of agreements that
resulted in the discontinuation of joint venture arrangements
with respect to 42 residences. In October 2001, Alterra
negotiated the buyout of a joint venture partner&#146;s interest
in 15 residences in connection with a modification and
settlement agreement with one investor group. In December 2001,
Alterra terminated its joint venture with Pioneer Development
Company, or Pioneer, by exchanging ownership interests in 12
joint venture entities jointly owned with this group, resulting
in Alterra and Pioneer each acquiring sole ownership in six of
these residences. Also in December 2001, Alterra terminated its
development joint venture with Manor Care, Inc. relating to 13
residences in connection with consummating a global settlement
of various pending claims between Alterra and Manor Care and its
affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Acquisition and History of Fortress CCRC Portfolio</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
a wholly-owned subsidiary of ours merged with and into Fortress
CCRC resulting in the issuance of an aggregate of
8,250,000&nbsp;shares of our common stock for all of the
outstanding membership interests of Fortress CCRC. As a result
of this transaction, Fortress CCRC became our wholly-owned
subsidiary and Fortress Investment Trust&nbsp;II, the former
sole member of Fortress CCRC, received shares of our common
stock and became a significant stockholder of ours. See
&#147;Principal and Selling Stockholders&#148; and &#147;Certain
Relationships and Related Party Transactions.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The NBA is a 501(c)(3) not-for-profit organization founded in
1887. As a result of deteriorating operating performance and
unsuccessful negotiations to restructure the NBA&#146;s debt and
management, bonds issued by the NBA were trading at a discount
to their par value. Between January and February 2004, FIT CCRC
LLC, an affiliate of Fortress, acquired the NBA debt and helped
form the unsecured creditors&#146; committee to lead a
restructuring of the NBA. In February 2004, the NBA elected to
file for bankruptcy protection. In September 2004, Fortress CCRC
negotiated an asset purchase agreement to acquire 11 CCRC
facilities consisting of 4,053&nbsp;units/beds (including
825&nbsp;resident-owned cottages or our CCRC campuses managed by
us) across ten states from the NBA as debtor in possession under
Chapter&nbsp;11 of the U.S.&nbsp;bankruptcy code. Fortress CCRC
was subsequently selected as the winning bidder through a
bankruptcy auction in December 2004. In April and May 2005,
Fortress CCRC purchased 11 of the facilities consisting of
4,053&nbsp;units/beds (including 825 resident-owned cottages or
our CCRC campuses managed by us) from the NBA for an aggregate
purchase price of approximately $211.7&nbsp;million, before
closing costs. Three of these facilities were sold by Fortress
CCRC to other purchasers for $30.3&nbsp;million simultaneously
with or shortly after their purchase. Of the eight facilities
that remained, Fortress CCRC sold one on July&nbsp;1, 2005 for
$2.5&nbsp;million and one is currently under contract for sale.
It is our intention to retain ownership of six of these
facilities and manage the one facility that we recently sold. We
refer to these six facilities in this prospectus as the
&#147;Fortress CCRC Portfolio.&#148; We plan to utilize
BLC&#146;s operating expertise to improve the Fortress CCRC
Portfolio, which we believe has been severely under-managed as a
result of significant turmoil at the NBA prior to and during the
bankruptcy process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Our Product Offerings</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We offer a variety of senior living housing and service
alternatives in over 380 facilities located across the United
States. Our primary product offerings consist mainly of
(i)&nbsp;Independent Living Facilities, (ii)&nbsp;Assisted
Living Facilities, (iii)&nbsp;Memory Care Facilities, and
(iv)&nbsp;CCRCs. Following is a description of each:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <U>Independent Living Facilities</U></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Independent Living Facilities are primarily designed for
middle to upper income senior citizens age&nbsp;70 and older who
desire an upscale residential environment providing the highest
quality of service.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The majority of our Independent Living Facilities consist of
both independent living and assisted living units in a single
facility, which allows residents to &#147;age-in-place&#148; by
providing them with a continuum of senior independent and
assisted living services. While the number varies depending upon
the particular facility, 85% of all of the units at our
Independent Living Facilities are independent living units (of
our facilities with both independent and assisted living units,
approximately 76% of the total units are designated as
independent living units), with a smaller number of units
licensed for assisted living.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Independent Living Facilities are large multi-story
buildings containing from 74 to 341&nbsp;units. Residents may
choose from studio, one-bedroom and two-bedroom units, depending
upon the specific facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each Independent Living Facility provides residents with basic
services such as meal service, 24-hour emergency response,
housekeeping, concierge services, transportation and
recreational activities. Most of these facilities also offer
custom tailored supplemental care services at an additional
charge under the &#147;Personally Yours&#148; program, which may
include medication reminders, check-in services and escort and
companion services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the basic services, our Independent Living
Facilities that include assisted living also provide residents
with supplemental care services options to provide assistance
with ADLs. The levels of care provided to residents vary from
facility to facility depending, among other things, upon the
licensing requirements of the state in which the facility is
located.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Residents in these facilities are able to maintain their
residency for an extended period of time due to the range of
service options available to residents (not including skilled
nursing) as their needs change. Residents with cognitive or
physical frailties and higher level service needs are
accommodated with supplemental services in their own units or,
in certain facilities, are cared for in a more structured and
supervised environment on a separate wing or floor. These
facilities also have a dedicated assisted living staff,
including nurses at the majority of facilities, and separate
assisted living dining rooms and activity areas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Independent Living Facilities represent approximately 48.3%
of our total senior living capacity.
</DIV>

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    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <U>Assisted Living Facilities</U></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Assisted Living Facilities offer housing and 24-hour
assistance with ADLs to mid-acuity frail and elderly residents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Assisted Living Facilities include both freestanding,
multi-story facilities with more than 30&nbsp;beds and smaller,
freestanding single story facilities with less than 30 beds.
Depending upon the specific location, the facility may include
(i)&nbsp;private studio, one-bedroom and one-bedroom deluxe
apartments, or (ii)&nbsp;individual rooms for one or two
residents in wings or &#147;neighborhoods&#148; scaled to a
single-family home, which includes a living room, dining room,
patio or enclosed porch, laundry room and personal care area, as
well as a caregiver work station.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All residents at these facilities receive the basic care level,
which includes ongoing health assessments, three meals per day
and snacks, coordination of special diets planned by a
registered dietitian, assistance with coordination of physician
care, social and recreational activities, housekeeping and
personal laundry services. In some locations we offer our
residents exercise programs and programs designed to address
issues associated with early stages of Alzheimer&#146;s and
other forms of dementia. In addition, we offer higher levels of
personal care services to residents at these facilities that are
very physically frail or experiencing early stages of
Alzheimer&#146;s disease or other dementia and who require more
frequent or intensive physical assistance or increased personal
care and supervision due to cognitive impairments. For example,
physically frail residents may require medication management,
two-person transfer from a wheelchair or incontinence care.
These additional services, which we offer for an additional
cost, are part of our &#147;YourCare&#148; program.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Assisted Living Facilities represent approximately 30.5% of
our senior living capacity.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <U>Memory Care Facilities</U></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Memory Care Facilities are specially designed freestanding
facilities for residents with Alzheimer&#146;s disease and other
dementias requiring the attention, personal care and services
needed to help cognitively impaired residents maintain a higher
quality of life.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Memory Care Facilities have from 20 to 60 beds and some are
part of a campus setting, which includes a free-standing
assisted living facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of their progressive decline in cognitive abilities,
including impaired memory, thinking and behavior, residents at
these facilities typically require higher levels of personal
care and services. In addition, residents require increased
supervision because they are typically highly confused, wander
prone and incontinent. Specialized services include assistance
with ADLs, behavior management and an activities program, the
goal of which is to provide a normalized environment that
supports residents&#146; remaining functional abilities.
Whenever possible, residents participate in all facets of daily
life at the residence, such as assisting with meals, laundry and
housekeeping.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our Memory Care Facilities represent approximately 10.2% of our
senior living capacity.
</DIV>

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    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <U>CCRCs</U></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our CCRCs offer a variety of living arrangements and services to
accommodate all levels of physical ability and health. Most of
our CCRCs have independent living, assisted living and skilled
nursing available on one campus, and some also include memory
care and Alzheimer&#146;s units. In addition, four of our CCRC
facilities also contain single-family homes that are owned by
the resident, who pays a monthly maintenance charge to the
community for various maintenance services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of our CCRCs require the residents in the independent
living apartment units to pay a one-time upfront entrance fee,
which fee is partially refundable upon the subsequent sale of
the unit or, in certain cases, upon the sale of a comparable
unit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we have one skilled nursing facility&nbsp;&#151;
Westbury Care Center&nbsp;&#151; that is not part of a CCRC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our CCRCs represent approximately 10.7% of our total senior
living capacity. Our single skilled nursing facility represents
approximately 0.3% of our total senior living capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Operations Overview</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We continually review opportunities to expand the amount of
services we provide to our residents. To date, we have been able
to increase our monthly resident fees on an annual basis and
generally have experienced increasing facility operating margins
through a combination of the implementation of efficient
operating procedures and the economies of scale associated with
the size and number of our facilities. Our operating procedures
include securing national vendor contracts to obtain consistent
low pricing for certain services such as food, energy and
insurance, implementing strict budgeting and financial controls
at each facility, and establishing standardized training and
operations procedures. We believe that successful senior living
operators must effectively combine the business disciplines of
housing, hospitality, health care, marketing, finance and real
estate expertise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have implemented intensive standards, policies and procedures
and systems, including detailed staff manuals, which we believe
have contributed to our facility operating margins. We have
centralized accounting controls, finance and other operating
functions at our corporate headquarters so that, consistent with
our operating philosophy, facility-based personnel can focus on
resident care and efficient operations. Headquarters staff in
Chicago, Illinois and our staff at the operations support center
in Milwaukee, Wisconsin are responsible for the establishment of
company-wide policies and procedures relating to, among other
things, resident care; facility design and facility
</DIV>

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<DIV align="left" style="font-size: 10pt;">
operations; billings and collections; accounts payable; finance
and accounting; risk management; development of employee
training materials and programs; marketing activities; the
hiring and training of management and other facility-based
personnel; compliance with applicable local and state regulatory
requirements; and implementation of our acquisition, development
and leasing plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Consolidated Corporate Operations Support</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have developed a centralized infrastructure and services
platform, which provides us with a significant operational
advantage over local and regional operators of senior living
facilities. The size of our business also allows us to achieve
increased efficiencies with respect to various corporate
functions such as human resources, finance, accounting, legal,
information technology and marketing. We are also able to
realize cost efficiencies in the purchasing of food, supplies,
insurance, benefits, and other goods and services. In addition,
we have established an operations group to support all of our
product lines and facilities in areas such as training,
regulatory affairs, asset management, dining and procurement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Facility Staffing and Training</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each facility has an Executive Director or Residence Director,
each a Director, responsible for the overall day-to-day
operations of the facility, including quality of care, social
services and financial performance. Each Director receives
specialized training from us. In addition, a portion of each
Director&#146;s compensation is directly tied to the operating
performance of the facility and to the maintenance of high
occupancy levels. We believe that the quality of our facilities,
coupled with our competitive compensation philosophy, have
enabled us to attract high-quality, professional Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depending upon the size of the facility, each Director is
supported by a facility staff member who is directly responsible
for day-to-day care of the residents and either facility staff
or regional support to oversee the facility&#146;s marketing and
community outreach programs. Other key positions supporting each
facility may include individuals responsible for food service,
activities, housekeeping, and engineering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that quality of care and operating efficiency can be
maximized by direct resident and staff contact. Employees
involved in resident care, including the administrative staff,
are trained in the support and care needs of the residents and
emergency response techniques. We have adopted formal training
and evaluation procedures to help ensure quality care for our
residents. We have extensive policy and procedure manuals and
hold frequent training sessions for management and staff at each
site.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Quality Assurance</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain quality assurance programs at each of our facilities
through our corporate headquarters&#146; staff. Our quality
assurance program is designed to achieve a high degree of
resident and family member satisfaction with the care and
services that we provide. Our quality control measures include,
among other things, facility inspections conducted by corporate
staff on a regular basis. These inspections cover the appearance
of the exterior and grounds; the appearance and cleanliness of
the interior; the professionalism and friendliness of staff;
resident care; the quality of activities and the dining program;
observance of residents in their daily living activities; and
compliance with government regulations. Our quality control
measures also include the survey of residents and family members
on a regular basis to monitor their perception of the quality of
services provided to residents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to foster a sense of community as well as to respond to
residents&#146; desires, at our facilities, we have established
a resident council or other resident advisory committee that
meets monthly with the Director of the facility. Separate
resident committees also exist at many of these facilities for
food service, activities, marketing and hospitality. These
committees promote resident involvement and satisfaction and
enable facility management to be more responsive to the
residents&#146; needs and desires.
</DIV>

<P align="center" style="font-size: 10pt;">77

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Marketing and Sales</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our marketing strategy is intended to create awareness of us,
our facilities, our products and our services among potential
residents and their family members and among referral sources,
including hospital discharge planners, physicians, clergy, area
agencies for the elderly, skilled nursing facilities, home
health agencies and social workers. Our marketing staff develops
overall strategies for promoting our facilities and monitors the
success of our marketing efforts, including outreach programs.
In addition to direct contacts with prospective referral
sources, we also rely on print advertising, yellow pages
advertising, direct mail, signage and special events, health
fairs and community receptions. Resident referral programs have
also been established and are promoted at many facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Facilities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We operate over 380 facilities across 32&nbsp;states, with the
capacity to serve over 30,000 residents. Of the facilities we
currently operate, we own 58, we lease 307 pursuant to operating
and capital leases and 16 are owned by third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding our
facilities, excluding assets held for sale:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Occupancy</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">at 6/30/05</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B><FONT face="helvetica,arial">Ownership Status at June&nbsp;30, 2005</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT face="helvetica,arial">State</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Units/Beds</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Occupancy</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Leased</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Owned</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Managed</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Alabama
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">222</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">70.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Arizona
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">661</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">California
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,031</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Colorado
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,522</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Connecticut
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">292</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">98.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Florida
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,907</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">90.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Georgia
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">280</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">98.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Idaho
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">228</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">94.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Illinois
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,306</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">93.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Indiana
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,150</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Iowa
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">139</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Kansas
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,227</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Maine
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">180</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">85.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Massachusetts
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">282</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">98.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Michigan
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,851</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">85.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Minnesota
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">643</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Missouri
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">948</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">85.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Nevada
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">306</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">93.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">New Jersey
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">343</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">New Mexico
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">344</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">96.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">New York
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,196</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">North Carolina
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">743</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">91.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Ohio
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,657</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Oklahoma
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,557</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">81.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Oregon
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">823</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Pennsylvania
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">541</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">South Carolina
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">336</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Tennessee
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">390</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">94.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Texas
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,537</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">85.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Virginia
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">353</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Washington
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">864</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">91.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wisconsin
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">422</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">91.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,281</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">381</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">78

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below sets forth certain information regarding the top
15 facilities, by number of units, for BLC and Alterra, as well
as all of the properties in the Prudential Portfolio and the
Fortress CCRC Portfolio. In addition, we included certain
information for BLC&#146;s The Hallmark-Battery Park facility,
which is pictured on the inside cover of this prospectus.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B><FONT face="helvetica,arial">Number of Units/Beds</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Independent</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Assisted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Memory</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Skilled</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Equity</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD align="left" nowrap><B><FONT face="helvetica,arial">Facility Name</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Location</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Living</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Living</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Care</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Nursing</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Homes</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="5" align="left" valign="top">
    <B><FONT face="helvetica,arial">Brookdale Living
    Communities</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Hallmark-Chicago
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Chicago, IL</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">341</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">341</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Hallmark-Battery Park
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">New York, NY</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">197</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Devonshire of Lisle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Lisle, IL</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">296</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">321</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Classic at West Palm Beach
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">West Palm Beach, FL</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">237</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">64</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">301</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Atrium of San Jose
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">San&nbsp;Jose, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">291</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">291</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">River Bay Club
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Quincy, MA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">282</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">282</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Chambrel at Roswell
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Roswell, GA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">224</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">32</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">280</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Grand Court Overland Park
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Overland Park, KS</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">276</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">276</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Woodside Terrace
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Redwood City, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">177</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">93</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">270</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Chambrel at Island Lake
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Longwood, FL</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">213</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">40</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">269</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Kenwood of Lakeview
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Chicago, IL</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">220</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">44</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">264</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Devonshire of Hoffman Estates
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Hoffman Estates, IL</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">228</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">34</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">262</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Chambrel at Club Hill
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Garland, TX</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">176</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">68</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">260</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Chambrel at Williamsburg
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Williamsburg, VA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">201</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">255</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Heritage of Des Plaines
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Des Plaines, IL</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">226</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">255</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Meadows of Glen Ellyn
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Glen Ellyn, IL</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">190</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">44</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">234</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Alterra</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wynwood&nbsp;&#38; Villas at
    Canterbury Gardens
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Aurora, CO</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">153</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">65</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">218</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wynwood of Columbia Edgewater
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Richland, WA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Villas at Union Park
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Tacoma, WA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">119</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wynwood of Kenmore
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Kenmore, NY</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">113</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">113</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wynwood of Northampton Manor
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Richboro, PA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">113</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">113</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wynwood of Niskayuna
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Niskayuna, NY</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wynwood of Rogue Valley
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Medford, OR</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">95</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">95</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Villas of Sparks
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Sparks, NV</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">90</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">90</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wynwood of Forest Grove
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Forest Grove, OR</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Villas of McMinnville
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">McMinnville, OR</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">87</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">87</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Villas of Sherman Brook
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Clinton, NY</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Villas of Summerfield Village
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Syracuse, NY</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Villas at the Atrium
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Boulder, CO</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">82</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">82</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wynwood of River Place
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Boise, ID</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">80</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">80</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wynwood of Manlius
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Manlius, NY</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">80</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">80</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Prudential Portfolio</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lodge at Paulin Creek
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    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Santa Rosa, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">250</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">250</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Oak Tree Villa
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Scotts Valley, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">126</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">70</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">196</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Pacific Inn
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    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Torrance, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">134</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">134</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Inn at the Park
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Irvine, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">70</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">64</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">134</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Nohl Ranch Inn
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Anaheim Hills, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">85</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">42</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">127</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mirage Inn
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Rancho Mirage, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">94</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">125</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Ocean House
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Santa Monica, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">67</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">117</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Lexington
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Ventura, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">114</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Gables
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Monrovia, CA</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">41</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">23</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">64</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Fortress CCRC
    Portfolio</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cypress Village
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Jacksonville, FL</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">364</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">292</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">815</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Foxwood Springs
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    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Raymore, MO</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">141</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">62</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">557</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Village at Skyline
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Colorado Springs, CO</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">347</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">57</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">59</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">562</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Robin Run Village
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Indianapolis, IN</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">199</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">228</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">511</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Patriot Heights
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">San&nbsp;Antonio, TX</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">162</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
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    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60</FONT></TD>
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    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">232</FONT></TD>
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    <FONT face="helvetica,arial">Ramsey Home/Ramsey Village
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
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    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">Des Moines, IA</FONT></TD>
    <TD>&nbsp;</TD>
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    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
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    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">51</FONT></TD>
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    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24</FONT></TD>
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    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54</FONT></TD>
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    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
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    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">139</FONT></TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, on July&nbsp;1, 2005, Fortress CCRC sold
Heatherwood Village, a 189&nbsp;unit-facility located in Newton,
Kansas, which a subsidiary of BLC will continue to manage
pursuant to a management agreement with the new owner. Fortress
CCRC also owns Heritage Crossing, a 233-unit facility located in
Edmond, Oklahoma, which is currently under contract for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Corporate Offices</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our main corporate offices are all leased, including our
30,314&nbsp;square foot corporate headquarters facility in
Chicago, Illinois, and our 44,222&nbsp;square foot operations
support center in Milwaukee, Wisconsin.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The senior living industry is highly competitive. We compete
with numerous other companies that provide similar senior living
alternatives, such as home health care agencies, community-based
service programs, retirement communities, convalescent centers
and other senior living providers. In general, regulatory and
other barriers to competitive entry in the independent living
and assisted living segments of the senior living industry are
not substantial, except in the skilled nursing segment. Although
new construction of senior living communities has declined, we
have experienced and expect to continue to experience
competition in our efforts to acquire and operate senior living
facilities. Some of our present and potential senior living
competitors have, or may obtain, greater financial resources
than us and may have a lower cost of capital. Consequently, we
may encounter competition that could limit our ability to
attract residents or expand our business, which could have a
material adverse effect on our revenues and earnings. Our major
competitors are Sunrise Senior Living, Inc., Colson&nbsp;&#38;
Colson/ Holiday Retirement Corp., American Retirement
Corporation, Professional Community Management Life Care
Services, LLC and Atria Senior Living Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Customers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our target independent living residents are senior citizens
age&nbsp;70 and older who desire or need a more supportive
living environment. The average independent living resident
resides in an independent living facility for 30&nbsp;months. A
number of our independent living residents relocate to one of
our facilities in order to be in a metropolitan area that is
closer to their adult children.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our target assisted living residents are predominantly female
senior citizens age&nbsp;85 and older who require daily
assistance with two or three ADLs. The average assisted living
resident resides in an assisted living facility for
21&nbsp;months. Residents typically enter an assisted living
facility due to a relatively immediate need for services that
might have been triggered by a medical event or need.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe our combination of independent and assisted living
operating expertise and the broad base of customers that this
enables us to target creates a unique opportunity for us to
invest in a broad spectrum of assets in the senior living
industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our Employees</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005 we had approximately
10,500&nbsp;full-time employees, of which 139 work in our
Chicago headquarters office and 153 work in our Milwaukee
operations support center. Five of our employees are unionized.
We currently consider our relationship with our employees to be
good.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Government Regulation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The regulatory environment surrounding the senior living
industry continues to intensify in the amount and type of laws
and regulations affecting it. In addition, federal, state and
local officials are increasingly focusing their efforts on
enforcement of these laws. This is particularly true for large
for-profit, multi-facility providers like us. Some of the laws
and regulations that impact our industry include: state and
local laws impacting licensure, protecting consumers against
deceptive practices,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
and generally affecting the facilities&#146; management of
property and equipment and how we otherwise conduct our
operations, such as fire, health and safety laws and regulations
and privacy laws, federal and state laws designed to protect
Medicare and Medicaid, which mandate what are allowable costs,
pricing, quality of services, quality of care, food service,
resident rights (including abuse and neglect) and fraud; federal
and state residents&#146; rights statutes and regulations;
federal and state laws as to referral payments and
self-referrals, and Anti-Kickback and physicians self-referral
(&#147;Stark&#148;) laws; and safety and health standards set by
the Occupational Safety and Health Administration. We are unable
to predict the future course of federal, state and local
legislation or regulation. Changes in the regulatory framework
could have a material adverse effect on our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Many senior living facilities are also subject to regulation and
licensing by state and local health and social service agencies
and other regulatory authorities. Although requirements vary
from state to state, these requirements generally address:
personnel education, training and records; facility services,
including administration of medication, assistance with
self-administration of medication and the provision of nursing
services; staffing levels; monitoring of resident wellness;
physical plant specifications; furnishing of resident units;
food and housekeeping services; emergency evacuation plans;
professional licensing and certification of staff prior to
beginning employment; and resident rights and responsibilities,
including in some states the right to receive health care
services from providers of a resident&#146;s choice that are not
our employees. In several of the states in which we operate or
may operate, we are prohibited from providing certain higher
levels of senior care services without first obtaining the
appropriate licenses. In addition, in several of the states in
which we operate or intend to operate, assisted living
facilities and skilled nursing facilities require a certificate
of need before the facility can be opened or the services at an
existing facility can be expanded. In most states, senior living
facilities also are subject to state or local building, zoning,
fire and food service codes and must be in compliance with these
local codes before licensing or certification may be granted.
These laws and regulatory requirements could affect our ability
to expand into new markets and to expand our services and
facilities in existing markets. In addition, if any of our
presently licensed facilities operates outside of its licensing
authority, it may be subject to penalties, including closure of
the facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The intensified regulatory and enforcement environment impacts
providers like us because of the increase in the number of
inspections or surveys by governmental authorities and
consequent citations for failure to comply with regulatory
requirements. Unannounced surveys or inspections may occur
annually or bi-annually, or following a state&#146;s receipt of
a complaint about the facility. From time to time in the
ordinary course of business, we receive deficiency reports from
state regulatory bodies resulting from such inspections or
surveys. Most inspection deficiencies are resolved through an
agreed-to plan of corrective action relating to the
facility&#146;s operations, but the reviewing agency typically
has the authority to take further action against a licensed or
certified facility, which could result in the imposition of
fines, imposition of a provisional or conditional license,
suspension or revocation of a license, suspension or denial of
admissions, loss of certification as a provider under federal
health care programs or imposition of other sanctions, including
criminal penalties. Loss, suspension or modification of a
license may also cause us to default under our leases and/or
trigger cross-defaults. Sanctions are taken against providers or
facilities without regard to the providers&#146; or
facilities&#146; history of compliance. We may also expend
considerable resources to respond to federal and state
investigations or other enforcement action under applicable laws
or regulations. To date, none of the deficiency reports received
by us has resulted in a suspension, fine or other disposition
that has had a material adverse effect on our revenues. However,
any future substantial failure to comply with any applicable
legal and regulatory requirements could result in a material
adverse effect to our business as a whole. In addition, state
Attorney Generals vigorously enforce consumer protection laws as
those laws relate to the senior living industry. State Medicaid
Fraud and Abuse Units investigate assisted living facilities
even if the facility or any of its residents do not receive
federal or state funds.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Regulation of the senior living industry is evolving because of
the growing interests of a variety of advocacy organizations and
political movements attempting to standardize regulations for
certain segments of the industry, specifically assisted living.
Our operations could suffer if future regulatory developments,
such as federal assisted living laws and regulations, as well as
mandatory increases in the scope and severity of deficiencies
determined by survey or inspection officials, increase the
number of citations that can result in civil or criminal
penalties. Current laws and regulations allow enforcement
officials to make determinations on whether the care provided by
one or more of our facilities exceeds the level of care for
which the facility is licensed. A facility found delivering care
beyond its license might result in the immediate transfer and
discharge of residents, which creates market instability for a
provider having several facilities in the region. Furthermore,
many state regulations allow citations in one facility to impact
other facilities in the state in the effort to
&#147;control&#148; the big for-profit providers. Revocation of
a license at a given facility could therefore impact our ability
to obtain new licenses or to renew existing licenses at other
facilities, which may also cause us to be in default under our
leases and trigger cross-defaults or may also trigger defaults
under certain of our credit agreements, or adversely affect our
ability to obtain financing in the future. If a state were to
find that one facility&#146;s citation will impact another of
our facilities, this will also increase costs and result in
increased surveillance by the state survey agency. If regulatory
requirements increase, whether through enactment of new laws or
regulations or changes in the enforcement of existing rules,
including increased enforcement brought about by advocacy
groups, in addition to federal and state regulators, our
operations could be adversely affected. In addition, any adverse
finding by survey and inspection officials may serve as the
basis for false claims lawsuits by private plaintiffs and may
lead to investigations under Anti-Kickback or Stark laws, which
may result in civil or criminal penalties against the facility
or individual.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are various extremely complex federal and state laws
governing a wide array of referrals, relationships and
arrangements and prohibiting fraud by health care providers,
including those in the senior living industry, and governmental
agencies are devoting increasing attention and resources to such
anti-fraud initiatives. The Health Insurance Portability and
Accountability Act of 1996, or HIPAA, and the Balanced Budget
Act of 1997 expanded the penalties for health care fraud. In
addition, with respect to our participation in federal health
care reimbursement programs, the government or private
individuals acting on behalf of the government may bring an
action under the False Claims Act alleging that a health care
provider has defrauded the government and seek treble damages
for false claims and the payment of additional monetary civil
penalties. Recently, other health care providers have faced
enforcement action under the False Claims Act. The False Claims
Act allows a private individual with knowledge of fraud to bring
a claim on behalf of the federal government and earn a
percentage of the federal government&#146;s recovery. Because of
these incentives, so-called &#147;whistleblower&#148; suits have
become more frequent. Also, if any of our facilities exceeds its
level of care, we may be subject to private lawsuits alleging
&#147;transfer trauma&#148; by residents. Such allegations could
also lead to investigations by enforcement officials, which
could result in penalties, including the closure of facilities.
The violation of any of these regulations may result in the
imposition of fines or other penalties that could jeopardize our
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, in several states, we operate facilities that
participate in federal and/or state health care reimbursement
programs, including state Medicaid waiver programs for assisted
living facilities and the Medicare skilled nursing facility
benefit program, or other federal and/or state health care
programs. Consequently, we are subject to federal and state laws
that prohibit anyone from presenting, or causing to be
presented, claims for reimbursement which are false, fraudulent
or are for items or services that were not provided as claimed.
Violation of any of these laws can result in loss of licensure,
civil or criminal penalties and exclusion of health care
providers or suppliers from furnishing covered items or services
to beneficiaries of the applicable federal and/or state health
care reimbursement program. Loss of licensure may also cause us
to default under our leases and/or trigger cross-defaults.
Similar state laws vary from state to state, are sometimes vague
and have rarely been interpreted by courts or regulatory
agencies. We cannot be sure that these laws will be interpreted
consistently or in keeping with past practices.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are also subject to certain federal and state laws that
regulate financial arrangements by health care providers, such
as the Federal Anti-Kickback Law. This law makes it unlawful for
any person to offer or pay (or to solicit or receive) &#147;any
remuneration ... directly or indirectly, overtly or covertly, in
cash or in kind&#148; for referring or recommending for purchase
any item or service which is eligible for payment under the
Medicare and/or Medicaid programs. Authorities have interpreted
this statute very broadly to apply to many practices and
relationships between health care providers and sources of
patient referral. If a health care provider were to violate the
Anti-Kickback Law, it may face criminal penalties and civil
sanctions, including fines and possible exclusion from
government programs such as Medicare and Medicaid, which may
also cause us to default under our leases and/or trigger
cross-defaults. Adverse consequences may also result if we
violate federal Stark laws related to Medicare and Medicaid
physician self-referrals. While we endeavor to comply with all
laws that regulate the licensure and operation of our senior
living communities, it is difficult to predict how our revenues
could be affected if we were subject to an action alleging such
violations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are also subject to federal and state laws designed to
protect the confidentiality of patient health information. The
U.S.&nbsp;Department of Health and Human Services, or HHS, has
issued rules pursuant to HIPAA relating to the privacy of such
information. Rules that became effective April&nbsp;14, 2003
govern our use and disclosure of health information at certain
HIPAA covered facilities. We established procedures to comply
with HIPAA privacy requirements at these facilities. The HIPAA
rule establishing administrative, physical and technical
security standards for health information became effective in
April 2005. To the best of our knowledge, we are in compliance
with this rule. Although both current and pending HIPAA
requirements affect the manner in which we handle health data
and communicate with payors at covered facilities, we believe
that the cost of compliance will not have a material adverse
effect on our business, financial condition or results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Environmental Matters</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under various federal, state and local environmental laws, a
current or previous owner or operator of real property, such as
us, may be held liable in certain circumstances for the costs of
investigation, removal or remediation of certain hazardous or
toxic substances, including, among others, petroleum and
materials containing asbestos, that could be located on, in, at
or under a property, regardless of how such materials came to be
located there. Additionally, such an owner or operator of real
property may incur costs relating to the release of hazardous or
toxic substances, including government fines and payments for
personal injuries or damage to adjacent property. The cost of
any required investigation remediation, removal, mitigation,
compliance, fines or personal or property damages and our
liability therefore could exceed the property&#146;s value
and/or our assets&#146; value. In addition, the presence of such
substances, or the failure to properly dispose of or remediate
the damage caused by such substances, may adversely affect our
ability to sell such property, to attract additional residents
and retain existing residents, to borrow using such property as
collateral or to develop or redevelop such property. In
addition, such laws impose liability for investigation,
remediation, removal and mitigation costs on persons who
disposed of or arranged for the disposal of hazardous substances
at third-party sites. Such laws and regulations often impose
liability without regard to whether the owner or operator knew
of, or was responsible for, the presence, release or disposal of
such substances as well as without regard to whether such
release or disposal was in compliance with law at the time it
occurred. Moreover, the imposition of such liability upon us
could be joint and several, which means we could be required to
pay for the cost of cleaning up contamination caused by others
who have become insolvent or otherwise judgment proof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not believe that we have incurred such liabilities as
would have a material adverse effect on our business, financial
condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our operations are subject to regulation under various federal,
state and local environmental laws, including those relating to:
the handling, storage, transportation, treatment and disposal of
medical waste products generated at our facilities;
identification and warning of the presence of
</DIV>

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asbestos-containing materials in buildings, as well as removal
of such materials; the presence of other substances in the
indoor environment, and protection of the environment and
natural resources in connection with development or construction
of our properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of our facilities generate infectious or other hazardous
medical waste due to the illness or physical condition of the
residents, including, for example, blood-soaked bandages, swabs
and other medical waste products and incontinence products of
those residents diagnosed with an infectious disease. The
management of infectious medical waste, including its handling,
storage, transportation, treatment and disposal, is subject to
regulation under various federal, state and local environmental
laws. These environmental laws set forth the management
requirements for such waste, as well as related permit,
record-keeping, notice and reporting obligations. Each of our
facilities has an agreement with a waste management company for
the proper disposal of all infectious medical waste. The use of
such waste management companies does not immunize us from
alleged violations of such medical waste laws for operations for
which we are responsible even if carried out by such waste
management companies, nor does it immunize us from third-party
claims for the cost to cleanup disposal sites at which such
wastes have been disposed. Any finding that we are not in
compliance with environmental laws could adversely affect our
business operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Federal regulations require building owners and those exercising
control over a building&#146;s management to identify and warn,
via signs and labels, their employees and certain other
employers operating in the building of potential hazards posed
by workplace exposure to installed asbestos-containing materials
and potential asbestos-containing materials in their buildings.
The regulations also set forth employee training, record-keeping
requirements and sampling protocols pertaining to
asbestos-containing materials and potential asbestos-containing
materials. Significant fines can be assessed for violation of
these regulations. Building owners and those exercising control
over a building&#146;s management may be subject to an increased
risk of personal injury lawsuits by workers and others exposed
to asbestos-containing materials and potential
asbestos-containing materials. The regulations may affect the
value of a building containing asbestos-containing materials and
potential asbestos-containing materials in which we have
invested. Federal, state and local laws and regulations also
govern the removal, encapsulation, disturbance, handling and/or
disposal of asbestos-containing materials and potential
asbestos-containing materials when such materials are in poor
condition or in the event of construction, remodeling,
renovation or demolition of a building. Such laws may impose
liability for improper handling or a release to the environment
of asbestos-containing materials and potential
asbestos-containing materials and may provide for fines to, and
for third parties to seek recovery from, owners or operators of
real properties for personal injury or improper work exposure
associated with asbestos-containing materials and potential
asbestos-containing materials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The presence of mold, lead-based paint, contaminants in drinking
water, radon and/or other substances at any of the facilities we
own or may acquire may lead to the incurrence of costs for
remediation, mitigation or the implementation of an operations
and maintenance plan. Furthermore, the presence of mold,
lead-based paint, contaminants in drinking water, radon and/or
other substances at any of the facilities we own or may acquire
may present a risk that third parties will seek recovery from
the owners, operators or tenants of such properties for personal
injury or property damage. In some circumstances, areas affected
by mold may be unusable for periods of time for repairs, and
even after successful remediation, the known prior presence of
extensive mold could adversely affect the ability of a facility
to retain or attract residents and could adversely affect a
facility&#146;s market value.
</DIV>

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We believe that we are in material compliance with applicable
environmental laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are unable to predict the future course of federal, state and
local environmental regulation and legislation. Changes in the
environmental regulatory framework could have a material adverse
effect on our business. In addition, because environmental laws
vary from state to state, expansion
</DIV>

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of our operations to states where we do not currently operate
may subject us to additional restrictions on the manner in which
we operate our facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Intellectual Property</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Brookdale&#174;, Hallmark&#174;, Devonshire&#174;,
Alterra&#174;, Crossings&#174;, Wynwood&#174;, Clare
Bridge&#174; and Clare Bridge Cottage&#174; are registered
service marks of ours.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have been involved in litigation and claims incidental to the
conduct of our business comparable to other companies in the
senior living industry. Certain claims and lawsuits allege large
damage claims and may require significant legal costs to defend
and resolve. Similarly, our industry is always subject to
scrutiny by governmental regulators, which could result in
litigation related to regulatory compliance matters. As a
result, we maintain insurance policies in amounts and with the
coverage and deductibles we believe are adequate, based on the
nature and risks of our business, historical experience and
industry standards. We believe that the cost of defending any
pending or future litigation or challenging any pending or
future regulatory compliance matter will not have a material
adverse effect on our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Leases</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Provident Sale-Leasebacks</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In each of the following sale-leaseback transactions, Provident
entered into the relevant purchase agreement and master lease
agreement with certain of our affiliated entities in 2004. On
June&nbsp;7, 2005, Ventas announced that it had completed the
acquisition of Provident pursuant to the terms of the Agreement
and Plan of Merger dated as of April&nbsp;12, 2005, pursuant to
which Provident was merged with and into a wholly-owned
subsidiary of Ventas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Alterra&#146;s Sale of the Alterra/Provident
Properties</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the fourth quarter of 2004, pursuant to a stock purchase
agreement, or the Alterra/Provident Purchase Agreement, entered
into in June 2004, as amended in October 2004, between Alterra
and Provident, Alterra sold to Provident 100% of the outstanding
capital stock of certain Alterra subsidiaries for an aggregate
purchase price of approximately $240.4&nbsp;million, or the
Alterra/Provident Sale. Pursuant to the terms of the
Alterra/Provident Purchase Agreement, Alterra consummated the
Alterra/Provident Acquisition in two separate closings. The
Alterra subsidiaries owned a total of 47&nbsp;assisted living
facilities, or the Alterra/Provident Properties, together in
each case with certain related personal property. Certain other
real and personal property owned by the Alterra subsidiaries and
all of the liabilities and obligations of the Alterra
subsidiaries other than certain liabilities relating to the
Alterra/Provident Properties that are not required to be
reflected or reserved on a balance sheet in accordance with GAAP
were transferred to or assumed by Alterra or a subsidiary of
Alterra prior to the completion of the Alterra/Provident Sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra agreed to indemnify Provident for any losses it may
incur as a result of (a)&nbsp;any inaccuracy or breach of any
representation or warranty made by Alterra in the
Alterra/Provident Purchase Agreement, (b)&nbsp;any breach or
failure by Alterra to perform its obligations under the
Alterra/Provident Purchase Agreement, (c)&nbsp;any
Alterra/Provident Excluded Assets and Alterra/Provident Excluded
Liabilities, (d)&nbsp;certain environmental claims relating to
the Alterra/Provident Properties, (e)&nbsp;any third party
claims arising out of actions, omissions, events or facts
occurring on or prior to the closing of the Alterra/Provident
Sale relating to the assets, properties and business of Alterra,
and (f)&nbsp;certain fees and expenses of Alterra&#146;s
advisors. Alterra is not required to indemnify Provident for any
loss arising from matters set forth in clauses&nbsp;(a) and (e)
above, which does not exceed $25,000 and has no obligation to
indemnify Provident with respect to any losses until such losses
exceed $650,000 and in no event will Alterra be required to
indemnify Provident for losses in excess
</DIV>

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<DIV align="left" style="font-size: 10pt;">
of $25.0&nbsp;million that arise from those matters set forth in
clauses&nbsp;(a), (d)&nbsp;and (e) above. In addition, Alterra
is not required to indemnify Provident for breaches of
representations and warranties of which Provident&#146;s
officers obtained actual knowledge prior to the execution of the
Alterra/Provident Purchase Agreement. Alterra is also not
required to indemnify Provident for matters of which
Provident&#146;s officers obtained actual knowledge prior to the
closing of the Alterra/Provident Acquisition, unless on or
before such date Provident notified them of such matters and
Alterra agreed prior to such date that Provident was not
obligated to close the transactions contemplated by the
Alterra/Provident Purchase Agreement. Moreover, Alterra has
generally agreed to indemnify Provident against any tax
liability with respect to periods ending on or before, and
transactions occurring before, the Alterra/Provident Sale.
Provident has agreed to release the stockholders of Alterra and
their affiliates (other than Alterra and its subsidiaries) from
any claims or losses arising out of the transactions
contemplated by the Alterra/Provident Purchase Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provident agreed to indemnify Alterra for any losses it may
incur as a result of (a)&nbsp;any inaccuracy or breach of any
representation or warranty made by it, (b)&nbsp;any breach or
failure by Provident to perform its obligations under the
Alterra/Provident Purchase Agreement and (c)&nbsp;any third
party claims as a result of any inspections of the
Alterra/Provident Properties performed by Provident. Provident
is not required to indemnify Alterra for any loss arising from
matters set forth in clauses&nbsp;(a) and (e) above, which does
not exceed $25,000 and Provident has no obligation to indemnify
Alterra with respect to any losses until such losses exceed
$650,000 and in no event will Provident be required to indemnify
for losses in excess of $25.0&nbsp;million that arise from those
matters set forth in clauses&nbsp;(a) and (c)&nbsp;above.
Moreover, Provident has generally agreed to indemnify Alterra
against any tax liability (other than tax liability required to
be borne or paid by the Alterra/Provident Tenants (as defined
below) pursuant to the Alterra/Provident Property Leases (as
defined below)) with respect to periods beginning after, and
transactions occurring after, the closing of the
Alterra/Provident Sale.
</DIV>

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Alterra paid all of the expenses incurred in connection with the
consummation of the Alterra/Provident Sale, including certain of
Provident&#146;s expenses. However, upon Alterra&#146;s request
and pursuant to the terms of the Alterra/Provident Purchase
Agreement, Provident funded these transaction expenses in the
aggregate amount of $3.5&nbsp;million, which were contemplated
as part of the purchase price and lease basis upon which base
rent is calculated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Provident&#146;s Master Lease Arrangements with
Alterra</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the Alterra/Provident Properties is owned by a
subsidiary of Provident, each an Alterra/Provident Landlord and
leased to a subsidiary of Alterra, each an Alterra/Provident
Tenant. Each Alterra/Provident Tenant entered into a master
sublease agreement with Alterra relating to the possession,
management and operation of each of the Alterra/Provident
Properties, or the Alterra/Provident Sublease Agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Concurrently with the consummation of the Alterra/Provident
Sale, subsidiaries and/or affiliates of Alterra entered into
master lease arrangements with Provident, which include
(a)&nbsp;two master lease agreements covering the
Alterra/Provident Properties, each an Alterra/Provident Property
Lease, (b)&nbsp;an agreement regarding leases, or the
Alterra/Provident Agreement Regarding Leases, entered into
between the parent company of the Alterra/Provident Tenants or
ALS&nbsp;Holdings and the parent company of each of the owners
of the Alterra/Provident Properties, or PSLT-ALS Holdings,
(c)&nbsp;a lease guaranty by ALS&nbsp;Holdings with respect to
each Alterra/Provident Property Lease, and (d)&nbsp;a guaranty
of the Alterra/Provident Agreement Regarding Leases by Alterra.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each Alterra/Provident Property Lease is for an initial term of
15&nbsp;years, with two five-year renewal options at
Alterra&#146;s election, provided that, among other things,
(i)&nbsp;no event of default exists under any Alterra/Provident
Property Lease or under the Alterra/Provident Agreement
Regarding Leases and (ii)&nbsp;no management termination event
(as defined in the Alterra/Provident Agreement Regarding Leases)
has occurred and is continuing beyond any applicable cure
period. Pursuant to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
the Alterra/Provident Agreement Regarding Leases, the renewal
option may only be exercised with respect to all of the
Alterra/Provident Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of the Alterra/Provident Property Leases, the
Alterra/Provident Tenants are obligated to pay base rent in an
amount equal to the Alterra/Provident Lease Rate (as defined
below) multiplied by the sum of the purchase price (including
certain transaction costs incurred in connection with the
Alterra/Provident Sale which, at Alterra&#146;s election,
Provident actually paid (including financing costs and debt
assumption fees) in the amount of $3.5&nbsp;million) plus any
subsequent amounts Provident funds in connection with capital
improvements as described in each Alterra/Provident Property
Lease and the Alterra/Provident Agreement Regarding Leases, such
sum, the Alterra/Provident Lease Basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The initial lease rate for the first year of each of the
Alterra/Provident Property Leases is 9.625%, as the same may be
escalated, the Alterra/Provident Lease Rate. Commencing on
November&nbsp;1, 2005 and January&nbsp;1, 2006, respectively,
for each of the Alterra/Provident Leases, and annually
thereafter, the Alterra/Provident Lease Rate will be increased
by an amount equal to the lesser of (i)&nbsp;four times the
percentage increase in the Consumer Price Index during the
immediately preceding year or (ii)&nbsp;2.5%, or the
Alterra/Provident Annual Increase. During the first year of each
renewal term of the Alterra/Provident Property Leases, the
Alterra/Provident Lease Basis will be adjusted to equal the
greater of (i)&nbsp;the then current fair market value of the
Alterra/Provident Properties as increased by amounts delivered
by the Alterra/Provident Landlord to the Alterra/Provident
Tenant for capital expenditures (as determined by mutual
agreement, or if no such agreement is reached, by an acceptable
appraisal method) or (ii)&nbsp;the Alterra/Provident Lease Basis
for the immediately preceding calendar month. Rent under the
Alterra/Provident Property Leases will continue to be escalated
in accordance with the Alterra/Provident Annual Increase during
each renewal term. Rent under the Alterra/Provident Property
Leases is paid in arrears on a monthly basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Alterra/Provident Property Leases include representations,
warranties and covenants customary for sale-leaseback
transactions. Lease payments are absolute triple-net, with the
Alterra/Provident Tenants responsible for the payment of all
taxes, assessments, utility expenses, insurance premiums and
other expenses relating to the operation of the
Alterra/Provident Properties. In addition, the Alterra/Provident
Tenants are required to comply with the terms of the mortgage
financing documents encumbering the Alterra/Provident
Properties, if and to the extent that, among other things, the
terms of such mortgage financings are commercially reasonable
and consistent with other mortgage financings of comparable
properties in the then current market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provident may, in Provident&#146;s sole discretion, upon the
request of any Alterra/Provident Tenant, fund additional
necessary capital improvements to the properties. If Provident
funds any such amounts, the Alterra/Provident Lease Basis shall
be increased on a dollar-for-dollar basis for the amounts
Provident funds. In addition, if PSLT-ALS Holdings, ALS Holdings
and Alterra mutually determine that there is an extraordinary
capital expenditure requirement at one or more of the
Alterra/Provident Properties, or if PSLT-ALS Holdings and ALS
Holdings mutually agree that a capital improvement at one or
more of the Alterra/Provident Properties is necessary for the
applicable Alterra/Provident Property to be in compliance with
legal requirements, PSLT-ALS Holdings agreed to fund up to
$5&nbsp;million in the aggregate over the term of the
Alterra/Provident Property Leases with respect to all of the
Alterra/Provident Properties and the amount that Provident funds
will be added to the Alterra/Provident Lease Basis. The
Alterra/Provident Tenants have covenanted to keep the
Alterra/Provident Properties in good condition and repair.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Alterra/Provident Property Leases also require the
Alterra/Provident Tenants to spend on capital expenditures and
improvements, in the aggregate among the Alterra/Provident
Properties, at least $400&nbsp;per unit per year, or the
Alterra/Provident Capital Improvement Amount, which amount will
be increased annually by the percentage increase in the Consumer
Price Index. If in any year the Alterra/Provident Tenants do not
expend the entire Alterra/Provident Capital Improvement Amount,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
the unspent portion of such funds will be deposited into an
escrow account with Provident or with Provident&#146;s mortgage
lender, which funds will be available for property capital
expenditures and capital improvements; provided that such funds
will not be made available to the Alterra/Provident Tenants
until such time as the Alterra/Provident Tenants have expended
the Alterra/Provident Capital Improvement Amount, in the
aggregate, in such year. In addition, Provident has the right to
require reserve funding of the Alterra/Provident Capital
Improvement Amount upon its request or as required by a mortgage
lender. Provident and the Alterra/Provident Tenants have also
agreed to review periodically the Alterra/Provident Capital
Improvement Amount to adjust as necessary to properly maintain
the properties in accordance with the requirements of the
Alterra/Provident Property Leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Alterra/Provident Agreement Regarding Leases provides that,
commencing on the first month of the first calendar quarter
which occurs after the commencement date of the
Alterra/Provident Agreement Regarding Leases, and on the first
month of each calendar quarter thereafter, ALS&nbsp;Holdings
shall deposit with PSLT-ALS Holdings as security for the
performance of the terms, conditions and provisions of the
Alterra/Provident Agreement Regarding Leases and the
Alterra/Provident Property Leases, 50% of excess cash flow for
the prior calendar quarter, until such time as the amount held
as the security deposit is equal to $10&nbsp;million. At
ALS&nbsp;Holdings&#146; option, ALS&nbsp;Holdings may post
letters of credit in such amounts in lieu of depositing a cash
security deposit. For the foregoing purposes, excess cash flow
will be computed by taking the net operating income for all of
the Alterra/Provident Properties and subtracting the
Alterra/Provident Base Rent payable in the aggregate under all
of the Alterra/Provident Property Leases. If the
Alterra/Provident Properties achieve and maintain a lease
coverage ratio of at least 1.15 to 1.00 for two consecutive six
month periods, then the security deposit will be returned to ALS
Holdings. For the foregoing purposes, the lease coverage ratio
will be computed by taking the net operating income for all of
the Alterra/Provident Properties (subject to certain
adjustments), and dividing it by the applicable
Alterra/Provident Base Rent payable in the aggregate under all
of the Alterra/Provident Property Leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Alterra/Provident Agreement Regarding Leases also provides
that PSLT-ALS Holdings may cause to be terminated the
Alterra/Provident Sublease Agreements upon the occurrence of
certain events, including if any Alterra/Provident Tenant fails
to make a rental payment under the Provident/Alterra Master
Lease and ALS Holdings fails to make rental payments under the
Agreement Regarding Leases and the failure goes uncured for more
than 30&nbsp;days, if an event of default has occurred and
remains uncured under any of the Alterra/Provident Property
Leases or under the Alterra/Provident Agreement Regarding
Leases, or if the Alterra operator becomes bankrupt or
insolvent, has bankruptcy proceedings filed against it or
voluntarily files for bankruptcy. In addition, PSLT-ALS Holdings
may cause to be terminated the Alterra/Provident Sublease
Agreements if the Alterra/Provident Properties fail to maintain
on a quarterly basis a lease coverage ratio (measured quarterly
on a rolling four-quarter basis) of at least 1.05 to 1.00 during
any of the first through third lease years, and at least
1.10&nbsp;to 1.00 during any of the fourth through fifteenth
lease years and during each renewal term. ALS&nbsp;Holdings or
the Alterra operator has the right to cure a failure to maintain
the required lease coverage ratio by posting cash or a letter of
credit in an amount sufficient to decrease, on a
dollar-for-dollar basis, the aggregate applicable
Alterra/Provident Base Rent reflected in the denominator of the
lease coverage ratio calculation to the extent necessary to be
within compliance. This cure option may only be exercised two
times during the first through tenth years of the initial term.
If PSLT-ALS Holdings terminates any Alterra/Provident Sublease
Agreement and replaces the Alterra operator with a manager or
operator other than an affiliate of Alterra, the
Alterra/Provident Tenant has the right to terminate the
Alterra/Provident Property Lease with respect to the facility to
which such Alterra/Provident Sublease Agreement has been
terminated. If PSLT-ALS Holdings terminates one or more of the
Alterra/Provident Management Agreements but the
Alterra/Provident Tenants for such applicable Alterra/Provident
Properties do not terminate the applicable Alterra/Provident
Property Leases with respect to the applicable facilities, the
Alterra/Provident Tenant will enter into a new management
agreement with a replacement manager designated by PSLT-ALS
Holdings and is required to pay such replacement manager the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
management fee pursuant to the replacement management
agreements, provided that the Alterra/Provident Tenants will be
entitled to a credit against base rent for any payments
(excluding out-of-pocket reimbursements) payable to such
replacement manager in excess of an amount equal to five percent
of gross revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each Alterra/Provident Property Lease is unconditionally
guaranteed by ALS&nbsp;Holdings, and ALS&nbsp;Holdings&#146;
obligations under the Alterra/Provident Agreement Regarding
Leases are unconditionally guaranteed by Alterra. Under the
Alterra/Provident Property Leases, the Alterra/Provident Tenants
agreed to indemnify Provident from liabilities related to the
occupancy and operation of the Alterra/Provident Properties
prior to and during the term of the Alterra/Provident Property
Leases, with such indemnification continuing for 24&nbsp;months
following the termination of any such Alterra/Provident Property
Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with Provident&#146;s existing mortgage financing
for the Alterra/Provident Properties, the applicable
Alterra/Provident Tenant has subordinated its rights to those of
the applicable mortgage lender, and such mortgage lender has
entered into a subordination, non-disturbance and attornment
agreement agreeing not to disturb such Alterra/Provident
Tenant&#146;s right to possession.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each Alterra/Provident Property Lease prohibits the assignment
of any Alterra/Provident Property Lease by the applicable
Alterra/Provident Tenant. The Alterra/Provident Agreement
Regarding Leases also prohibits certain other &#147;changes of
control&#148; of certain Alterra entities, which includes with
certain exceptions (i)&nbsp;the acquisition or attainment by any
means by any person, or two or more persons acting in concert,
of direct or indirect beneficial ownership (within the meaning
of Rule&nbsp;13d-3 promulgated under the Exchange Act) or
control of 50% or more, or rights, options or warrants to
acquire 50% or more, of the voting stock or membership interests
in Alterra, ALS&nbsp;Holdings or in any of the Alterra/Provident
Tenants, or (ii)&nbsp;the merger or consolidation of Alterra,
ALS Holdings, any Alterra/Provident Tenant or any Person that
directly or indirectly owns more than 50% of the membership
interests in ALS&nbsp;Holdings or any Alterra/Provident Tenant
with or into any other person, or (iii)&nbsp;any one or more
sales or conveyances to any person of all or substantially all
of the assets of Alterra, ALS&nbsp;Holdings or any
Alterra/Provident Tenant. However, the sale of 50% or more of
Alterra&#146;s outstanding stock by its stockholders, or the
sale of 50% or more of the voting stock or membership interests
in any direct or indirect parent of Alterra, does not require
Provident&#146;s or PSLT-ALS Holdings&#146; consent if, among
other things, ALS Holdings provides evidence reasonably
satisfactory to PSLT-ALS Holdings that Alterra or any successor
guarantor under the terms of such transaction (i)&nbsp;has
industry experience in owning, operating and managing senior
living properties that is at least comparable to or better than
that of Alterra and (ii)&nbsp;has a net worth at least equal to
the net worth of Alterra immediately prior to such transaction
(which net worth determination shall not take into account any
extraordinary and non-recurring transactions during the
12&nbsp;months prior to such transaction which reduces the net
worth of Alterra), both of which conditions were met in
connection with the formation transactions described in
&#147;Business&nbsp;&#151; History.&#148; In addition,
Provident&#146;s consent is not required in connection with any
initial public offering or other equity-raising transaction of
Alterra or any direct or indirect parent of Alterra or any
direct or indirect transfer of less than 50% of the ownership
interest in Alterra, provided that the stockholders who control
management of Alterra as of the date of the Lease continue to do
so.
</DIV>

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Each Alterra/Provident Lease provides that a default pertaining
to a single facility covered by one of the Alterra/Provident
Leases is an event of default with respect to all of the
facilities covered by such lease. In addition, a default by any
Alterra/Provident Tenant under its respective lease also causes
a default under the Alterra/Provident Agreement Regarding Leases
in certain circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>BLC&#146;s Sale of the BLC/Provident Properties</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2004, pursuant to a stock purchase agreement, or the
BLC/Provident Purchase Agreement, entered into in June 2004
between Fortress Brookdale Acquisition&nbsp;LLC, or FBA, and
Provident, FBA sold 100% of the outstanding capital stock of the
predecessor to BLC, Brookdale
</DIV>

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Living Communities, Inc., or Old Brookdale, to Provident for an
aggregate purchase price of approximately $742.4&nbsp;million,
or the BLC/Provident Sale. Old Brookdale indirectly owned
21&nbsp;senior living facilities, or the BLC/Provident
Properties, together with certain related personal property.
Prior to the closing of the BLC/Provident Sale in October 2004,
all of the other real and personal property owned by Old
Brookdale, all of the liabilities and obligations of Old
Brookdale other than the mortgage debt Provident assumed, and
certain liabilities relating to the BLC/Provident Properties
that are not required to be reflected or reserved on a balance
sheet in accordance with GAAP, the BLC/Provident Excluded Assets
and BLC/Provident Excluded Liabilities were transferred to or
assumed by BLC&nbsp;Senior Holdings&nbsp;Inc., which was
subsequently renamed Brookdale Living Communities, Inc. (which
we refer to as New Brookdale or BLC), or one of its wholly-owned
subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
New Brookdale agreed to indemnify Provident for any losses
Provident may incur as a result of (a)&nbsp;any inaccuracy or
breach of any representation or warranty made by Fortress
Brookdale Acquisition&nbsp;LLC or New Brookdale in the
BLC/Provident Purchase Agreement, (b)&nbsp;any breach or failure
by FBA or New Brookdale to perform its obligations under the
BLC/Provident Purchase Agreement, (c)&nbsp;any BLC/Provident
Excluded Assets and BLC/Provident Excluded Liabilities,
(d)&nbsp;certain environmental claims relating to the
BLC/Provident Properties, (e)&nbsp;any third party claims
arising out of actions, omissions, events or facts occurring on
or prior to the closing of Provident&#146;s purchase of the
BLC/Provident Properties relating to the assets, properties and
business of Old Brookdale, and (f)&nbsp;certain fees and
expenses of FBA&#146;s, New Brookdale&#146;s and Old
Brookdale&#146;s advisers. New Brookdale is not required to
indemnify Provident for any loss which does not exceed $100,000
and has no obligation to indemnify Provident with respect to
certain losses until such losses exceed $2.0&nbsp;million, and
in no event will New Brookdale be required to indemnify
Provident for losses in excess of $75.0&nbsp;million that arise
from those matters set forth in clauses&nbsp;(a), (d)&nbsp;and
(e)&nbsp;above. In addition, New Brookdale is not required to
indemnify Provident for matters of which Provident&#146;s
officers obtained actual knowledge prior to the execution of the
BLC/Provident Purchase Agreement. New Brookdale is also not
required to indemnify Provident for breaches of representations
and warranties of which Provident&#146;s officers obtained
actual knowledge prior to the closing of the BLC/Provident Sale,
unless on or before such date Provident notified them of such
matters and New Brookdale and FBA agreed prior to such date that
Provident was not obligated to close the transactions
contemplated by the BLC/Provident Purchase Agreement. Moreover,
New Brookdale has generally agreed to indemnify Provident
against any tax liability with respect to periods ending on or
before, and transactions occurring before, the BLC/Provident
Sale. Provident has agreed to release FBA and its affiliates
(other than New Brookdale and its subsidiaries) from any claims
or losses arising out of the transactions contemplated by the
BLC/Provident Purchase Agreement.
</DIV>

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Provident agreed to indemnify FBA and New Brookdale against any
losses that either may incur as a result of (a)&nbsp;any
inaccuracy or breach of any representation or warranty made by
Provident, (b)&nbsp;any breach by Provident to perform its
obligations under the BLC/Provident Purchase Agreement and
(c)&nbsp;certain third party claims as a result of any
inspections of the BLC/Provident Properties performed by
Provident. Provident is not required to indemnify FBA and New
Brookdale for any loss which does not exceed $75,000 and
Provident has no obligation to indemnify with respect to certain
losses until such losses exceed $2.0&nbsp;million, and in no
event will Provident be required to indemnify for losses in
excess of $75.0&nbsp;million which arise from those matters set
forth in clauses&nbsp;(a) and (c)&nbsp;above. Moreover,
Provident has generally agreed to indemnify New Brookdale
against any tax liability (other than tax liability required to
be borne or paid by the BLC/Provident Tenants (as defined below)
pursuant to the BLC/Provident Property Leases) with respect to
periods beginning, and transactions occurring, after the closing
of the BLC/Provident Sale.
</DIV>

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All of the expenses incurred in connection with the consummation
of the BLC/Provident Sale, including certain of Provident&#146;s
expenses, were payable by FBA. However, upon New
Brookdale&#146;s request and pursuant to the terms of the
BLC/Provident Purchase Agreement, Provident funded
</DIV>

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<DIV align="left" style="font-size: 10pt;">
these transaction expenses in the aggregate amount of
$7.4&nbsp;million, which were contemplated as part of the
purchase price and lease basis upon which base rent is
calculated.
</DIV>

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<B><I>BLC&#146;s Master Lease Arrangements With Provident</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each BLC/Provident Property is owned by a separate subsidiary of
Provident and leased to a subsidiary of BLC, each a
BLC/Provident Tenant. Each BLC/Provident Tenant entered into a
management agreement with another subsidiary of BLC relating to
the management and operation of each of the BLC/Provident
Properties, or the BLC/Provident Management Agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Concurrently with the consummation of the BLC/Provident Sale,
subsidiaries and/or affiliates of BLC entered into master lease
arrangements with Provident, which include (a)&nbsp;property
lease agreements for each of the BLC/Provident Properties, each
a BLC/Provident Property Lease, (b)&nbsp;an agreement regarding
leases, or the BLC/Provident Agreement Regarding Leases, entered
into between the parent company of the BLC/Provident Tenants, or
BLC Holdings, and the parent company of each of the owners of
the BLC/Provident Properties, or PSLT-BLC Holdings, (c)&nbsp;a
lease guaranty by BLC&nbsp;Holdings with respect to each
BLC/Provident Property Lease, and (d)&nbsp;a guaranty of the
BLC/Provident Agreement Regarding Leases by BLC.
</DIV>

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Each BLC/Provident Property Lease is for an initial term of
15&nbsp;years ending December&nbsp;31, 2019, with two ten-year
renewal options at BLC&#146;s election, provided that, among
other things, (i)&nbsp;no event of default exists under any
BLC/Provident Property Lease or under the BLC/Provident
Agreement Regarding Leases and (ii)&nbsp;no management
termination event (as defined in the BLC/ Provident Agreement
Regarding Leases) has occurred on the date that
BLC&nbsp;Holdings exercises the renewal option or on the
commencement date of the renewal period. Pursuant to the
BLC/Provident Agreement Regarding Leases, the renewal option may
be exercised only with respect to all of the BLC/Provident
Properties.
</DIV>

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Under the terms of the BLC/Provident Property Leases, the
BLC/Provident Tenants are obligated to pay base rent in an
amount equal to the BLC/Provident Lease Rate (as defined below)
multiplied by the sum of the purchase price (including certain
transaction costs incurred in connection with the BLC/Provident
Sale which, at BLC&#146;s election, Provident actually paid
(including financing costs and debt assumption fees) in the
amount of $7.4&nbsp;million) plus any subsequent amounts
Provident funds in connection with capital improvements as
described in each BLC/Provident Property Lease and the
BLC/Provident Agreement Regarding Leases, such sum, the
BLC/Provident Lease Basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The initial lease rate for the first year of each BLC/Provident
Property Lease is 8.1%, or the BLC/Provident Lease Rate.
Commencing on January&nbsp;1, 2006, and annually thereafter, the
BLC/Provident Lease Rate will be increased, as the same may be
escalated, the BLC/Provident Annual Increase, by an amount equal
to the lesser of (i)&nbsp;four times the percentage increase in
the Consumer Price Index during the immediately preceding year
or (ii)&nbsp;3%. During the first year of each renewal term of
the BLC/Provident Property Leases, (a)&nbsp;the BLC/Provident
Lease Rate will be adjusted to equal the greater of (i)&nbsp;the
then current fair market BLC/Provident Lease Rate (as determined
by mutual agreement, or if no such agreement is reached, by an
acceptable appraisal method) or (ii)&nbsp;the prior year&#146;s
BLC/Provident Lease Rate times the BLC/Provident Annual
Increase, and (b)&nbsp;the BLC/Provident Lease Basis will be
adjusted to equal the greater of (i)&nbsp;the then current fair
market value of the BLC/Provident Properties (as determined by
mutual agreement, or if no such agreement is reached, by an
acceptable appraisal method) or (ii)&nbsp;the BLC/Provident
Lease Basis for the immediately preceding calendar month (as
such amounts in (i) and (ii) above are increased by amounts
Provident funds in connection with capital improvements, as
described in each BLC/ Provident Property Lease and the BLC/
Provident Agreement Regarding Leases).
</DIV>

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In addition, base rent will be increased or decreased by a
&#147;floating adjustment&#148; tied to fluctuations in
Provident&#146;s floating rate-based mortgage indebtedness. The
floating adjustment is an amount computed monthly equal to the
increase or decrease in the applicable index (LIBOR, Prime
</DIV>

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<DIV align="left" style="font-size: 10pt;">
or BMA) from a base value multiplied by the aggregate
outstanding principal amount of all floating rate mortgages
encumbering the BLC/Provident Properties (i.e.,&nbsp;the dollar
amount of the BLC/Provident Floating Rate Debt (as defined
below) assumed by Provident at the inception of the
BLC/Provident Property Leases, plus if any refinancings shall
have occurred, the amount computed monthly equal to the increase
or decrease in the applicable index from a base value
(determined based on the rate in effect on the date of such
refinancing) multiplied by any additional amounts related to any
refinancing advanced by Provident to the BLC/Provident Tenants
pursuant to the terms of the BLC/Provident Property Leases and
the BLC/Provident Agreement Regarding Leases) other than from
refinancings under which BLC&nbsp;Holdings has not elected to
receive any proceeds, or the BLC/Provident Floating Rate Debt.
Rent under the BLC/Provident Property Leases will continue to be
escalated in accordance with the BLC/Provident Annual Increase
and the floating adjustment during each renewal term; provided,
however, that with respect to any floating rate mortgages, the
floating adjustment will apply only through the maturity date of
any underlying BLC/Provident Floating Rate Debt encumbering the
BLC/Provident Property at the commencement date of the
respective BLC/Provident Property Lease and with respect to any
refinancings that BLC either requests or under which BLC
requests net proceeds (as described below). Rent under the
BLC/Provident Property Leases is to be paid in arrears on a
monthly basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The BLC/Provident Property Leases include representations,
warranties and covenants customary for sale-leaseback
transactions. Lease payments are absolute triple-net, with the
BLC/Provident Tenants responsible for the payment of all taxes,
assessments, utility expenses, insurance premiums and other
expenses relating to the operation of the BLC/Provident
Properties. In addition, the BLC/Provident Tenants are required
to comply with the terms of the mortgage financing documents
encumbering the BLC/Provident Properties, if and to the extent
that, among other things, the terms of such mortgage financings
are commercially reasonable and consistent with other mortgage
financings of comparable properties in the then-current market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Provident may, in its sole discretion, upon the request of the
BLC/Provident Tenant, fund additional necessary capital
improvements to the properties. If Provident funds any such
amounts, the BLC/Provident Lease Basis shall be increased on a
dollar for dollar basis for the amounts Provident funds. In
addition, if Provident, the BLC/Provident Tenant and the manager
mutually determine that there is an extraordinary capital
expenditure requirement at one or more of the BLC/Provident
Properties, or if Provident and any BLC/Provident Tenant
mutually agree that a capital improvement at one or more of the
BLC/Provident Properties is necessary for the applicable
BLC/Provident Property to be in compliance with legal
requirements, Provident has agreed to fund up to
$5.0&nbsp;million in the aggregate over the term of the
BLC/Provident Property Leases with respect to all of the
BLC/Provident Properties and the amount that Provident funds
will be added to the BLC/Provident Lease Basis. The
BLC/Provident Tenants have covenanted to keep the BLC/Provident
Properties in good condition and repair and operate them in a
fashion similar to their operations on the commencement date of
the BLC/Provident Property Leases.
</DIV>

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The BLC/Provident Property Leases also require the BLC/Provident
Tenants to spend, in the aggregate among the BLC/Provident
Properties, at least $450&nbsp;per unit per year, or the
BLC/Provident Capital Improvement Amount, which amount will be
increased annually by the percentage increase in the Consumer
Price Index. Provident has the right to require reserved funding
of the BLC/Provident Capital Improvement Amount upon its request
or as required by a mortgage lender. Provident and the
BLC/Provident Tenants have also agreed to review periodically
BLC/Provident Capital Improvement Amount to adjust as necessary
to properly maintain the properties in accordance with the
requirements of the BLC/Provident Property Leases.
</DIV>

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If PSLT-BLC Holdings or any of the lessors under the
BLC/Provident Property Leases desire to enter into a new
mortgage financing or a refinancing of an existing mortgage or
otherwise obtain additional mortgage debt encumbering any of the
BLC/Provident Properties through December&nbsp;31, 2010,
provided there is no event of default, Provident will deliver
notice thereof to BLC Holdings together with a copy of a bona
fide term sheet setting forth the proposed terms of such mortgage
</DIV>

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<DIV align="left" style="font-size: 10pt;">
financing. BLC&nbsp;Holdings may elect to have the applicable
BLC/Provident Tenant obtain the net proceeds of any such
financing or may request that Provident obtain a financing that
will provide additional net proceeds for the applicable
BLC/Provident Tenant. In addition, BLC&nbsp;Holdings has the
right, through December&nbsp;31, 2010, to request two times per
calendar year that Provident attempt to obtain a new mortgage or
a refinancing of an existing mortgage with respect to the
BLC/Provident Properties. Provident has agreed that it will use
commercially reasonable efforts to obtain any such financing but
will be obligated only to seek such new financing from the
holder of the mortgage financing then in place with respect to
the applicable BLC/Provident Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Net financing or refinancing proceeds advanced by Provident to
the BLC/Provident Tenants as described in the immediately
preceding paragraph, each a BLC/Provident Tenant Refinance
Advance, will be added to the BLC/Provident Lease Basis under
the applicable BLC/Provident Property Lease. All fees,
penalties, premiums or other costs related to any BLC/Provident
Tenant Refinance Advance will also be included in the
BLC/Provident Lease Basis, except that if the applicable
BLC/Provident Tenant obtains net proceeds of any financing
Provident initiates, then only such portion of the fees,
penalties, premiums or other costs related to any such
BLC/Provident Tenant Refinance Advance, as it relates to the
proceeds disbursed to the applicable BLC/Provident Tenant, will
be included in the BLC/Provident Lease Basis. In addition, if
the monthly debt service relating to a BLC/Provident Tenant
Refinance Advance exceeds the amount of rent that will be
payable relating to the increase in the BLC/Provident Lease
Basis as a result of such BLC/Provident Tenant Refinance
Advance, then the applicable BLC/Provident Tenant is required to
pay the excess, and under certain circumstances the applicable
BLC/Provident Tenant will also be required to pay additional
amounts relating to increases in debt service and other costs
with respect to the remaining portion of the balance of the
refinancing, or the Additional Debt Service Costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the BLC/Provident Agreement Regarding Leases, Provident
agreed that, through December&nbsp;31, 2010, PSLT-BLC Holdings
will not (i)&nbsp;pledge or otherwise encumber its interest in
any of the lessors under the BLC/Provident Property Leases, or
(ii)&nbsp;permit the lessors under the BLC/Provident Property
Leases to pledge or otherwise encumber the BLC/Provident
Properties or their interests in the BLC/Provident Property
Leases, other than any existing mortgages, new mortgages,
refinancings of existing mortgages or other additional mortgage
debt encumbering the BLC/Provident Properties. In addition,
Provident agreed that it will not, and that PSLT-BLC Holdings
and the lessors under the BLC/Provident Property Leases will
not, enter into any agreement which contains covenants or other
agreements expressly restricting the ability of any lessor under
the BLC/Provident Property Leases to enter into a financing
which has been requested by BLC Holdings, as described above, or
expressly limiting the amount that may be borrowed thereunder,
except for any existing mortgages, new mortgages, refinancings
of existing mortgages or other additional mortgage debt that may
encumber the BLC/Provident Properties from time to time.
</DIV>

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Pursuant to the BLC/Provident Agreement Regarding Leases, FBA
deposited $20.0&nbsp;million at closing with PSLT-BLC Holdings
as security for the performance of the terms, conditions and
provisions of the BLC/Provident Agreement Regarding Leases and
the BLC/Provident Property Leases. Provided there is no event of
default under the BLC/Provident Agreement Regarding Leases,
BLC&nbsp;Holdings has the right to request that portions of the
security deposit be paid to the BLC/Provident Tenants&#146; to
reimburse them for the expenditure requirement under each of the
BLC/Provident Property Leases with respect to capital
improvements of $450&nbsp;per unit per year (in the aggregate)
among the BLC/Provident Properties, up to a maximum amount of
$600&nbsp;per unit per year. If the BLC/Provident Properties
achieve and maintain a lease coverage ratio of at least 1.10 to
1.00 for a consecutive twelve month period, then
$10.0&nbsp;million of the security deposit will be returned to
BLC&nbsp;Holdings. If the BLC/Provident Properties achieve and
maintain a lease coverage ratio of at least 1.15 to 1.00 for a
consecutive twelve month period, then $15.0&nbsp;million of the
security deposit will be returned to BLC&nbsp;Holdings. Any
balance of the security deposit will be returned to
BLC&nbsp;Holdings if the BLC/Provident Properties achieve and
maintain a lease coverage ratio of at least 1.20 to 1.00 for
twelve consecutive months. For the foregoing purposes, the lease
coverage ratio will be computed by
</DIV>

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<DIV align="left" style="font-size: 10pt;">
taking the net operating income for all of the BLC/Provident
Properties (subject to certain adjustments, including reductions
for management fees and capital expenditure requirements), and
dividing it by base rent payable and Additional Debt Service
Costs in the aggregate under all of the BLC/Provident Property
Leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The BLC/Provident Agreement Regarding Leases also provides that
PSLT-BLC Holdings may terminate the BLC/Provident Management
Agreements upon the occurrence of certain events, including if
any BLC/Provident Tenant fails to make a rental payment and the
failure goes uncured for more than 30&nbsp;days, if an event of
default has occurred and remains uncured under any of the
BLC/Provident Property Leases or under the BLC/Provident
Agreement Regarding Leases, or if the Brookdale manager becomes
bankrupt or insolvent, has bankruptcy proceedings filed against
it or voluntarily files for bankruptcy. In addition, PSLT-BLC
Holdings may terminate the BLC/Provident Management Agreements
if the BLC/Provident Properties fail to maintain on a quarterly
basis a lease coverage ratio (subject to certain adjustments) of
at least 1.05 to 1.00 from January&nbsp;1, 2009 through
December&nbsp;31, 2011; 1.10 to 1.00 from January&nbsp;1, 2012
through December&nbsp;31, 2016; and 1.15 to 1.00 from
January&nbsp;1, 2017 through December&nbsp;31, 2019 and during
each renewal term. BLC&nbsp;Holdings or the Brookdale manager
has the right to cure a failure to maintain the required lease
coverage ratio by posting cash or a letter of credit in an
amount sufficient to increase on a dollar-for-dollar basis the
net operating income reflected in the numerator of the lease
coverage ratio calculation to the extent necessary to be within
compliance. This cure option is available through
December&nbsp;31, 2014 and may only be exercised two times
thereafter through December&nbsp;31, 2019. If PSLT-BLC Holdings
terminates the BLC/Provident Management Agreement and replaces
the Brookdale manager with a manager other than an affiliate of
Brookdale, the BLC/Provident Tenant has the right to terminate
the BLC/Provident Property Leases as to which the BLC/Provident
Management Agreements have been terminated. If PSLT-BLC Holdings
terminates one or more of the BLC/Provident Management
Agreements but the BLC/Provident Tenants for such applicable
BLC/Provident Properties do not terminate the applicable
BLC/Provident Property Leases, the BLC/Provident Tenants will
enter into new management agreements with a replacement manager
designated by PSLT-BLC Holdings and will be required to pay any
replacement manager the management fee pursuant to the
replacement management agreements, provided that the
BLC/Provident Tenants will be entitled to a credit against base
rent for any payments (excluding out-of-pocket reimbursements)
payable to such replacement manager in excess of an amount equal
to five percent of gross revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each BLC/Provident Property Lease is unconditionally guaranteed
by BLC&nbsp;Holdings and BLC&nbsp;Holdings&#146; obligations
under the BLC/Provident Agreement Regarding Leases are
unconditionally guaranteed by BLC. Under the BLC/Provident
Agreement Regarding Leases, it is a default if the net worth of
BLC declines to less than $75.0&nbsp;million; provided that
Brookdale may cure any such default by depositing cash
collateral in the amount of (i)&nbsp;one month&#146;s rent under
all of the BLC/Provident Property Leases, if BLC&#146;s net
worth is between $50.0&nbsp;million and $75.0&nbsp;million;
(ii)&nbsp;three months&#146; rent, if BLC&#146;s net worth is
between $25.0&nbsp;million and $50.0&nbsp;million; and
(iii)&nbsp;six months&#146; rent, if BLC&#146;s net worth is
$25.0&nbsp;million or less. For purposes of the foregoing net
worth test, BLC&#146;s &#147;net worth&#148; means the sum of
BLC&#146;s net worth, determined in accordance with GAAP, plus
the &#147;deferred gain&#148; that results from the transactions
contemplated by the BLC/Provident Stock Purchase Agreement,
which, for the purposes of the BLC/Provident Agreement Regarding
Leases is deemed not to exceed $110.0&nbsp;million. Under the
BLC/Provident Property Leases, the BLC/Provident Tenants agreed
to indemnify Provident from all liabilities related to the
occupancy and operation of the BLC/Provident Properties prior to
and during the term of the BLC/Provident Property Leases, with
such indemnification continuing for twelve months following any
termination of the BLC/Provident Property Leases for any claims
made with respect to incidents occurring prior to the end of the
lease term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with any new mortgage financing, the applicable
BLC/Provident Tenant will subordinate its rights to those of
such new mortgage lender, provided such mortgage lender enters
</DIV>

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<DIV align="left" style="font-size: 10pt;">
into a subordination, non-disturbance and attornment agreement
and agrees not to disturb such BLC/Provident Tenant&#146;s right
to possession.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BLC has a right of first refusal if certain conditions set forth
in that certain letter agreement dated March&nbsp;28, 2005 are
met. If, during the initial term, Provident receives a bona fide
offer to purchase any of the properties leased to BLC that
Provident seeks to accept, Provident will notify BLC of the
offer and BLC has five days from receipt of the notice of
proposed sale to notify Provident of its election to purchase
all but not less than all of the property or properties that are
the subject of said notice (or ownership interests in the
applicable BLC/Provident Landlords) at the price reflected in
the bona fide offer, or the BLC/Provident Purchase Notice. BLC
is also required to pay Provident a non-refundable deposit of 2%
of the purchase price within three business days of the
BLC/Provident Purchase Notice and to close on the purchase of
the properties within 60&nbsp;days following the BLC/Provident
Purchase Notice. In the event BLC does not give notice that it
wishes to acquire the properties in question, or pay the deposit
or close on the properties within these time frames, the right
of first refusal is deemed waived with regard to the proposed
sale. Further, if BLC gives the BLC/Provident Purchase Notice
and pays the deposit, but then fails to close (except under
limited circumstances out of BLC&#146;s control), the entire
right of first refusal automatically becomes null and void as to
all of the properties leased to BLC. Notwithstanding the receipt
of a BLC/Provident Purchase Notice, at any time prior to the
closing of the sale of the properties to BLC under the right of
first refusal, Provident may nevertheless proceed to sell the
properties that were the subject of the bona fide offer to any
third party so long as Provident pays BLC an amount equal to two
times the amount of the deposit upon the closing of such sale
(which amount includes a refunding of the deposit).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the BLC/Provident Property Leases prohibits the
assignment of any BLC/Provident Property Lease by the applicable
BLC/Provident Tenant. The BLC/Provident Agreement Regarding
Leases also prohibits certain other &#147;changes of
control&#148; of BLC entities, which includes (i)&nbsp;the
acquisition or attainment by any means by any person, or two or
more persons acting in concert, of direct or indirect beneficial
ownership (within the meaning of Rule&nbsp;13d-3 promulgated
under the Exchange Act) or control of 50% or more, or rights,
options or warrants to acquire 50% or more, of the voting stock
or membership interests in BLC, BLC&nbsp;Holdings or in any of
the BLC/Provident Tenants, or (ii)&nbsp;the merger or
consolidation of BLC, BLC Holdings, any of the BLC/Provident
Tenants or any Person that directly or indirectly owns more than
50% of the membership interests in BLC, BLC&nbsp;Holdings or any
of the BLC/Provident Tenants with or into any other Person, or
(iii)&nbsp;any one or more sales or conveyances to any Person of
all or substantially all of the assets of BLC, BLC Holdings or
any of the BLC/Provident Tenants. However, any sale by BLC of
all or substantially all of its assets or any sale of more than
50% of BLC&#146;s outstanding stock by its stockholders, or the
sale of more than 50% of the membership interests in FBA, does
not require Provident&#146;s consent if
(i)&nbsp;BLC&nbsp;Holdings provides evidence reasonably
satisfactory to PSLT-BLC Holdings that the industry experience
of the guarantor under the terms of such transaction in owning,
operating and managing senior living properties similar to
BLC&#146;s properties is at least comparable to or better than
that of BLC and (ii)&nbsp;the guarantor under the terms of such
transaction has a net worth at least equal to $75.0&nbsp;million
both of which conditions were met in connection with the
formation transactions described in &#147;Business&nbsp;&#151;
History.&#148; In addition, Provident&#146;s consent is not
required in connection with (a)&nbsp;any initial public offering
or other equity-raising transaction of BLC or (b)&nbsp;any
direct or indirect transfer of less than 50% of the ownership
interest in BLC or FBA, if, in the case of a transfer
contemplated by clause&nbsp;(b), the current stockholders or
members, as the case may be, continue to control Provident.
</DIV>

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A default by any BLC/Provident Tenant under its BLC/Provident
Property Lease causes a default under the BLC/Provident
Agreement Regarding Leases in certain circumstances. In
addition, in certain circumstances termination of some of the
BLC/Provident Property Leases may cause an event of default
under facility mortgages.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Capstead Lease Arrangement with BLC</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2001, BLC entered into an agreement to purchase the
Chambrel Portfolio, for which it made earnest money deposits in
the aggregate amount of $4.0&nbsp;million. In connection with
the closing, BLC assigned its rights under the purchase and sale
agreements to subsidiaries of Capstead and on May&nbsp;1, 2002,
seven BLC&nbsp;subsidiaries, or the Chambrel Property Tenants,
entered into separate property lease agreements, or the Chambrel
Property Leases, with seven subsidiaries of
CMCP&nbsp;Properties, Inc., or Capstead Lessor, to lease the
Chambrel Portfolio. Simultaneously with the entering into of the
Chambrel Property Leases, BLC&nbsp;Properties&nbsp;I, LLC and
Brookdale Management Holding, LLC, collectively, the Chambrel
Master Tenant, entered into the Chambrel Master Lease with
Capstead Lessor. BLC&nbsp;Properties&nbsp;I, LLC has agreed to
guaranty the payment and performance of all of the Chambrel
Property Tenants&#146; obligations under the Chambrel Property
Leases and BLC has agreed to indemnify Capstead Lessor for
certain bad acts by the Chambrel Property Tenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Chambrel Master Lease is for an initial term of
20&nbsp;years and expires on April&nbsp;30, 2022. The Chambrel
Master Tenant has the right to renew all but not less than all
of the Chambrel Property Leases for two ten-year renewal terms.
The Chambrel Master Lease terms are co-terminus with the terms
of the Chambrel Property Leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Chambrel Property Leases include representations, warranties
and covenants customary for sale-leaseback transactions. Under
the Chambrel Master Lease, Chambrel Master Tenant is obligated
to pay to Capstead Lessor monthly rent in the amount of 1.25% of
the amount of capital investment Capstead made with respect to
its acquisition of the Chambrel Portfolio (including all
transaction costs incurred by Capstead in connection with the
acquisition), which was approximately $31.5&nbsp;million at the
time of the acquisition, which amount has subsequently been
reduced to reflect the sale of the Chambrel property located in
Akron, Ohio. The rent under the Chambrel Master Lease is
adjusted on May&nbsp;1 of each lease year by multiplying the
rent due for the immediately preceding lease year by the
increase in the consumer price index (excluding energy and food
prices), provided that such increase shall not exceed 3%. The
current amount of rent payable fluctuates monthly because the
lease payment is based on the underlying debt, which is a
pass-through, and fluctuates with changes in interest rates. For
the year ended December&nbsp;31, 2004 and the quarter ended
March&nbsp;31, 2005, the lease payment was $10.3&nbsp;million
and $2.7&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If at any time the Chambrel Portfolio fails to maintain a lease
coverage ratio, which is defined as the quotient of (i)&nbsp;the
total revenues, less operating expenses to (ii)&nbsp;the current
rent payment, of at least 1.10 on an aggregate basis, such
failure shall constitute an event of default under the Chambrel
Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Chambrel Property Leases, each Chambrel Property
Tenant is obligated to pay rent equal to all payments of debt
service (defined as the aggregate monthly interest and principal
due and payable under any facility mortgage or bond documents,
including and principal reserve payments) and debt costs and
reserves (defined as all payments, charges and costs payable to
the facility mortgagee other than debt service, including,
without limitation, late charges, default interest, any
reserves, impounds or escrows required for impositions,
insurance premiums or reserves for capital expenditures required
under the facility mortgage) as they relate to the outstanding
debt encumbering the Chambrel Portfolio directly to the relevant
lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the final maturity of any financing currently encumbering
any Chambrel property resulting in a balloon payment of
principal, Capstead shall be obligated to pay the amount
necessary to retire such indebtedness, and such balloon payment
shall not be included in the debt service calculation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Chambrel Property Leases are &#147;absolute net&#148;
leases, such that the Chambrel Property Tenants are obligated to
pay all costs and expenses incurred with respect to, and
associated with,
</DIV>

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<DIV align="left" style="font-size: 10pt;">
the Chambrel Portfolio, including, without limitation, all
impositions, utility charges, insurance costs, maintenance costs
and repair and restoration expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At any time after the fifth lease year, Chambrel Master Tenant
has the option to purchase all, but not less than all, of the
Chambrel Portfolio or the ownership interest of Capstead,
subject to the rights of any Chambrel property mortgagee to
consent to such a purchase, at a price equal to the greater of
(i)&nbsp;the fair market value of the Chambrel Portfolio, and
(ii)&nbsp;Capstead&#146;s equity in the Chambrel Portfolio, plus
the original principal balance of all financings encumbering the
Chambrel Portfolio on the date of entering into the Chambrel
Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Chambrel Master Tenant shall not, without the prior written
consent of Capstead Lessor, sell, assign or otherwise transfer
its ownership interest in the Chambrel Property Tenants or any
interest Chambrel Master Tenant has under the Chambrel Master
Lease. It shall constitute an event of default if (i)&nbsp;a
change of control which is defined as the acquisition by any
person, or two or more persons acting in concert, of beneficial
ownership of 50% or more, or rights, options or warrants to
acquire 50% or more, of the outstanding shares of voting stock
of Chambrel Master Tenant or any of the Chambrel Property
Tenants (other than the parent of Chambrel Master Tenant or any
of its affiliates in a transaction which shall not result in any
release of liability or obligation under the Chambrel Master
Lease) or the merger or consolidation of Chambrel Master Tenant
or any Chambrel Property Tenant with or into any other person or
any one or more sales or conveyances to any person of all or
substantially all of the assets of Chambrel Master Tenant or the
Chambrel Property Tenants (other than the parent of Chambrel
Master Tenant or any of its affiliates in a transaction which
shall not result in any release of liability or obligation under
the Chambrel Master Lease) occurs with respect to Chambrel
Master Tenant or if the ownership interest of Chambrel Master
Tenant in the Chambrel Property Tenants is voluntarily or
involuntarily transferred, assigned, conveyed, levied upon or
attached; and (ii)&nbsp;any person (other then the person who,
as of the entry into the Chambrel Master Lease, directly or
indirectly has an ownership interest in Chambrel Master Tenant)
acquired more than 9.8% of the outstanding ownership interest in
Chambrel Master Tenant, which in Capstead Lessor&#146;s sole
discretion, would adversely affect the status of Capstead Lessor
or its parent as a real estate investment trust under the tax
code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Failure of any Chambrel Property Tenant to pay for money
borrowed or for the deferred purchase price of material property
or services or any guaranty relating thereto that in the
aggregate exceeds $250,000 and which becomes due prior to
maturity as a result of such Chambrel Property Tenant&#146;s
failure shall also trigger a default under the applicable
Chambrel Property Lease. Also, a continuing default under any
Chambrel Property Lease is an event of default under the
Chambrel Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Ventas Lease Arrangement with BLC</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the first quarter of 2004, the limited partnerships that
owned 14 facilities, in which subsidiaries of BLC held general
and limited partnership interests, sold those facilities to
Ventas for approximately $114.6&nbsp;million. Ventas also
acquired another facility from a third party in a separate
transaction. Simultaneously with such sales, six wholly-owned
subsidiaries of BLC, or the Ventas Tenants, entered into and
became the tenants under a master lease, or the Ventas Master
Lease, with Ventas. The Ventas Master Lease currently covers
13&nbsp;facilities, or the Ventas Properties, and there are two
additional facilities that, because of restrictions contained in
their current financings, are leased to Ventas Tenants pursuant
to individual leases, or the Other Ventas Leases (together with
the Ventas Master Lease, the Ventas Lease), substantially
similar to the Ventas Master Lease and which will be added to
the Ventas Master Lease when their current financing expires.
BLC has guaranteed the Ventas Master Lease for the full and
prompt payment and performance of all of Ventas Tenants&#146;
obligations under the Ventas Master Lease. The guaranty requires
that BLC maintain a net worth (as defined) of not less than
$100.0&nbsp;million. For purposes of the foregoing net worth
test, BLC&#146;s &#147;net worth&#148; means the sum of
BLC&#146;s net worth, determined in accordance with
</DIV>

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<DIV align="left" style="font-size: 10pt;">
generally accepted accounting principles, or GAAP, plus the
&#147;deferred gain&#148; that results from the BLC/ Provident
Stock Purchase Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Ventas Master Lease&#146;s initial term is for 15&nbsp;years
and expires on January&nbsp;31, 2019. The Ventas Tenants have
two ten-year renewal options under the Ventas Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Ventas Tenants and BLC have posted a security deposit with
Ventas in the amount of six months&#146; of lease payments, or
$7.4&nbsp;million (all in the form of letters of credit).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of the Ventas Master Lease, the Ventas Tenants
currently are obligated to pay per annum rent of
$14.6&nbsp;million, which amount is net of a $0.2&nbsp;million
rent credit for one property, or the Ventas Base Rent, in equal
monthly installments during the first year of the lease. The
Ventas Base Rent increases annually by the greater of
(i)&nbsp;2.0% and (ii)&nbsp;75% of the increase in the consumer
price index.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Ventas Master Lease, Ventas Tenants are required to
maintain, as of the end of each fiscal quarter, a portfolio
coverage ratio of not less than 1.10:1.00. Failure to do so
shall not be an event of default if (i)&nbsp;the portfolio
coverage ratio is greater than or equal to 1.00:1.00 subject to
certain adjustments, including reductions for management fees,
insurance costs and capital expenditure requirements, and
(ii)&nbsp;within 15&nbsp;days following the date on which Ventas
Tenants were required to deliver its computation of the
portfolio coverage ratio for such fiscal quarter, Ventas Tenants
deposit with Ventas an additional security deposit equal to an
amount that, had such amount been added to the cash flow for
such 12&nbsp;month period, the portfolio coverage ratio for such
period would have been equal to 1.10:1.00. Notwithstanding the
forgoing, Ventas Tenants shall have the ability to cure a breach
of the portfolio coverage ratio in such a manner no more than
five times during the term of the lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No Ventas Tenant shall amend or otherwise change, by consent,
acquiescence or otherwise, the number of units at any facility
(in excess of 2% of the number of such units at any such
facility as of the lease commencement date) or the type and/or
licensed capacity at such facility (by more than 2% of the type
and/or licensed capacity at any such facility as of the lease
commencement date).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Ventas Tenants were required to expend $350&nbsp;per unit in
the first year of the Ventas Master Lease for capital
expenditures. Each year thereafter, the required amount of
capital expenditures is increased by the greater of
(x)&nbsp;1.5% and (y)&nbsp;75% of the actual increase in the
consumer price index. If the Ventas Tenants fail to make such
required capital expenditures, then Ventas has the right to
require the Ventas Tenants to fund a reserve to satisfy Ventas
Tenants&#146; annual capital expenditure requirements equal to
1/12 of the difference between the annual capital expenditure
spending requirement and the actual amount budgeted and/or spent
by the Ventas Tenants in the applicable year. Ventas Tenants are
also required to deposit into escrow one year&#146;s worth of
real estate taxes and insurance premiums in monthly installments
as a real estate tax reserve and insurance premium reserve,
respectively, all of which has been funded.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ventas Tenants, BLC, and each of their respective affiliates
(excluding, however, Fortress and Capital Z Partners, and
affiliates of each (other than BLC and its direct or indirect
subsidiaries)) shall not participate in the development or
construction of any assisted living facility or senior
independent living facility that (i)&nbsp;competes in any way
with, directly or indirectly, or is comparable in any way to,
any Ventas Properties, and (ii)&nbsp;is located within a
5&nbsp;mile radius of any Ventas Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Ventas Tenants have a one time purchase option for all
facilities except the Seasons of Glenview facility located in
Glenview, Illinois, during the 15th&nbsp;year of the Ventas
Master Lease, pursuant to which they may purchase the Ventas
Properties at their fair market value adjusted to reflect above
or below market financing on the existing financings on the
Ventas Properties at the commencement date of the Ventas Master
Lease, provided that there is a minimum purchase price equal to
Ventas&#146; purchase price for the Ventas Properties as
increased annually by the greater of (i)&nbsp;1.5% and
(ii)&nbsp;75% of the increase in consumer price index.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Ventas Master Lease does not permit (i)&nbsp;a conveyance,
sale, assignment, transfer, pledge, hypothecation, encumbrance
or other disposition of the direct or indirect interests in the
Ventas Tenants or BLC such that after such disposition any
person, together with its affiliates, owns or controls, directly
or indirectly, in the aggregate more than fifty percent of the
beneficial ownership interests of the Ventas Tenants or BLC or
possesses, directly or indirectly, the power to direct or cause
the direction of the management or policies of the Ventas
Tenants or BLC, whether through the ability to exercise voting
power, by contract or otherwise, or a Ventas Change of Control;
or (ii)&nbsp;BLC from merging or consolidating with any other
person or selling all or substantially all or its assets to any
other person on or subsequent to the date of the entering into
of the Ventas Master Lease, unless (a)&nbsp;immediately
following such Ventas Change of Control, BLC has a net worth, as
defined above, equal to or greater than $100.0&nbsp;million;
(b)&nbsp;there is no then existing monetary event of default;
and (c)&nbsp;such change of control would not otherwise result
in a default or &#147;event of default&#148; under, and as
defined in, the Ventas Master Lease, the guaranty or the
property management contract.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
It shall be an event of default if there is (i) a default under
the BLC/Provident Lease and related documents that in the
aggregate results in obligations of $2.0&nbsp;million or more
becoming due and payable, (ii) a default or breach by BLC of any
other contract or agreement that in the aggregate results in
more than $10.0&nbsp;million becoming due and payable;
(iii)&nbsp;with certain exceptions, any material default under
any material agreement between the tenants under the Ventas
Lease and the Ventas Landlord (and its affiliates); (iv)&nbsp;a
default under any credit, guaranty or similar agreement where
BLC is a party and maintains recourse obligations or provides
credit enhancement support if such default results in
acceleration aggregating $25.0&nbsp;million or more of
indebtedness; or (v)&nbsp;with certain exceptions, any material
default under the Other Ventas Leases. In addition, with certain
exceptions any default pertaining to a single facility
constitutes an event of default with respect to all facilities
covered by the Ventas Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Health Care REIT&#146;s Master Lease Arrangement with
Alterra</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In July 2001, individual leases on 38 residences that were
previously leased by Alterra from HCR and its affiliates were
terminated, and Alterra entered into a single master lease with
HCR and its affiliates with respect to 36 of such residences. In
subsequent amendments, ten additional properties with a capacity
for 424&nbsp;residents were refinanced out of unaffiliated
lender/lessor portfolios and added to the master lease, and one
property originally included in the master lease was sold and
removed from the master lease. As a result, Alterra currently
leases 45&nbsp;facilities from HCR and its affiliates under the
master lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The HCR Master Lease is for an initial term that expires
March&nbsp;19, 2017. Alterra has one fifteen-year renewal option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of the HCR Master Lease, Alterra is obligated to
pay monthly base rent, as the same may be increased from time to
time, the HCR Base Rent, based upon the aggregate amount of any
funds advanced by HCR to Alterra pursuant to the terms of the
HCR Master Lease (approximately $81.7&nbsp;million as of time of
execution of the HCR Master Lease; subject to adjustment as
properties are or have been added to or removed from the
portfolio) multiplied by 10.72%. HCR Base Rent increases
annually to an amount equal to the HCR Base Rent for the prior
year plus the lesser of (i)&nbsp;the maximum rent adjustment
(which is equal to the prior year&#146;s HCR Base Rent
multiplied by 1.025) and (ii)&nbsp;an amount determined by
multiplying the prior year&#146;s HCR Base Rent by the increase
in the consumer price index. If any annual adjustment based on
the increase in the consumer price index is in excess of the
maximum rent adjustment, then the excess is applied to previous
years in which the increase was less than the maximum rent
adjustment. The current rent payable under the HCR Master Lease
is approximately $13.5&nbsp;million. The rent payable under the
HCR Master Lease is a net rent payable to HCR, with Alterra
responsible for the payment of all taxes, assessments, utility
expenses, insurance premiums and other expenses relating to the
operation of the HCR Properties.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra has the option to purchase the HCR Properties upon
notice given during the last six months of the initial term or
renewal term, with an option price equal to the greater of
(i)&nbsp;any funds advanced by HCR to Alterra pursuant to the
terms of the HCR Master Lease, including the initial lease
advance of approximately $81.7&nbsp;million, as the same may be
adjusted as properties are or have been added to or removed from
the portfolio and (ii)&nbsp;the fair market value of the HCR
Properties at the time of the exercise of the option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra is required to maintain a letter of credit with HCR as a
security deposit for the performance of Alterra&#146;s
obligations under the HCR Master Lease. The letter of credit
currently held by HCR is approximately $1.1&nbsp;million
provided such amount may be increased to reflect any additional
amounts advanced to Alterra by HCR. Alterra&#146;s obligation to
maintain the letter of credit terminates if the portfolio
coverage ratio (the ratio of (i)&nbsp;portfolio cash flow to
(ii)&nbsp;the rent payments under the HCR Master Lease and all
other debt service and lease payments relating to the HCR
Properties) equals or exceeds 1.75:1.00 for four consecutive
fiscal quarters. In addition, Alterra has agreed to use its best
efforts to deliver to HCR additional letters of credit as
security deposits equal to approximately $0.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The HCR Master Lease prohibits the assignment of Alterra&#146;s
interest in the HCR Master Lease without HCR&#146;s consent. A
change in Alterra&#146;s stock ownership is not a prohibited
assignment. If Alterra seeks to effect a merger, consolidation,
or other structural change without HCR&#146;s consent, then
Alterra must have a net worth (calculated in accordance with
GAAP) of $50.0&nbsp;million immediately following such
transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra must maintain a portfolio coverage ratio in excess of
1.00 for 2005 and 1.20 for each year thereafter. Alterra must
also maintain available working capital per property in the
amount of $100,000. Failure to comply with the aforementioned
financial covenants will not constitute an event of default
unless such failure negatively affects 5% or more of the total
beds at the HCR Properties. If the failure affects less than 5%
of total beds at the HCR Properties, then Alterra shall have
90&nbsp;days after the occurrence of the potential event of
default to cure such failure to comply with the financial
covenant. If such potential event of default is not cured within
the 90&nbsp;day period, then Alterra is obligated within
12&nbsp;months thereafter to either (i)&nbsp;provide a
substitute property for that portion of the HCR Properties that
caused the potential event of default, which substitute property
must satisfy all of HCR&#146;s underwriting requirements, or
(ii)&nbsp;acquire that portion of the HCR Property which caused
the potential event of default at a price equal to the greater
of (a)&nbsp;the fair market value of such HCR Property and
(b)&nbsp;the allocated lease amount for the HCR Property plus
10% of the allocated lease amount. A loss of licensure or a bed
reduction in excess of 3% at any HCR Property shall also
constitute an event of default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Alterra achieves a facility coverage ratio in excess of
1.30:1.00 for eight consecutive quarters by July 2005 for the
four residences in Valparaiso, Indiana and Vero Beach, Florida,
then HCR has agreed to disburse $250,000 to Alterra as an
earnout amount provided that HCR&#146;s investment amount for
such residences is less than 90% of their appraised value and
provided certain other conditions in the HCR Master Lease are
satisfied. Alterra has satisfied this required facility coverage
ratio through 2004 and expects to continue to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An event of default pertaining to a single facility covered by
the HCR&nbsp;Master Lease constitutes an event of default with
respect to all facilities covered by the HCR&nbsp;Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>SNH&#146;s Sale-Leaseback Arrangement with Alterra</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;28, 2003, pursuant to a purchase and sale
agreement, or the SNH Purchase Agreement, two subsidiaries of
Alterra, ALS-Venture&nbsp;II, Inc., now inactive, and Wynwood of
Chapel Hill, LLC, together the Alterra SNH Sellers, sold 25
assisted living properties, or the SNH Properties, to SNH ALT
Leased Properties Trust, or SNH, for an aggregate purchase price
of approximately $61.0&nbsp;million, or the SNH Sale.
Simultaneously, AHC Trailside, Inc., a subsidiary of Alterra, or
AHC Trailside, entered into and became the tenant under a lease
with SNH for the SNH Properties. Pursuant to the SNH Purchase
Agreement, the Alterra SNH Sellers have agreed to indemnify SNH
</DIV>

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<DIV align="left" style="font-size: 10pt;">
against all obligations, claims, losses, damages, liabilities
and expenses arising out of (i)&nbsp;events, contractual
obligations, acts or omissions of the Alterra SNH Sellers
occurring in connection with the ownership or operation of any
of the SNH Properties prior to closing of the SNH Sale or
(ii)&nbsp;any damage to property of others or injury to or death
of any person or any claims or any debts or obligations
occurring on or about or in connection with any of the SNH
Properties at any time prior to such closing. Subject to the
terms of the SNH Lease, SNH has agreed to indemnify the Alterra
SNH Sellers against all obligations, claims, losses, damages,
liabilities and expenses arising out of (i)&nbsp;events,
contractual obligations, acts or omissions of SNH that occur in
connection with ownership or operation of any of the SNH
Properties on or after closing of the SNH Sale, or (ii)&nbsp;any
damage to property of others or injury to or death of any person
or any claims or any debts or obligations occurring on or about
any of the SNH Properties at any time after such closing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra has guaranteed the payment and performance of AHC
Trailside&#146;s obligations under the SNH Lease and the
obligations of the Alterra SNH Sellers under the SNH Purchase
Agreement. The obligations of AHC Trailside under the SNH Lease,
the obligations of the Alterra SNH Sellers under the SNH
Purchase Agreement and the obligations of Alterra under its
guaranty are secured by Alterra&#146;s pledge of 100% of the
capital stock of AHC Trailside, security liens on all of AHC
Trailside&#146;s personal assets and security liens on all of
Alterra&#146;s personal assets arising from or used in
connection with the SNH Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The SNH Lease&#146;s initial term, or the SNH Initial Term,
expires on December&nbsp;31, 2017. AHC Trailside has two
fifteen-year renewal options, each, an SNH Renewal Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of the SNH Lease, AHC Trailside must pay, on a
monthly basis, base rent, as the same may be increased from time
to time, the SNH Base Rent, in an amount equal to approximately
$0.6&nbsp;million. If SNH is required to pay for any repairs,
maintenance, renovations, or replacements at the SNH Properties,
the SNH Base Rent increases yearly by an amount equal to
(i)&nbsp;the greater of (a)&nbsp;10% and (b)&nbsp;the per annum
rate for 15&nbsp;year U.S.&nbsp;treasury obligations plus
500&nbsp;basis points not to exceed 11.5% times (ii)&nbsp;the
amount so disbursed for such items. AHC Trailside must also pay
additional rent with respect to each lease year, in an amount
equal to 10% of the net resident revenues for each property in
excess of the net resident revenue for 2003. Notwithstanding the
above, in no event shall the aggregate amount of SNH Base Rent
and additional rent payable in any calendar year exceed an
amount equal to approximately $7.2&nbsp;million in 2004, as
subsequently increased by 3%&nbsp;per year. The current amount
of SNH Base Rent and additional rent payable is approximately
$7.3&nbsp;million per annum, as may be adjusted simultaneously
with an adjustment to SNH&nbsp;Base Rent pursuant to the
SNH&nbsp;Lease or any decrease in the additional rent as a
result of the reduction in the number of units available at the
SNH&nbsp;Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The SNH Lease includes representations, warranties and covenants
customary for sale-leaseback transactions. The rent paid by AHC
Trailside is absolutely net to SNH, so that the payments yield
to SNH the full amount of the installments or amounts of rent
throughout the term. AHC Trailside has covenanted to keep the
leased property and all private roadways, sidewalks, and curbs
appurtenant thereto in good order and repair, reasonable wear
and tear excepted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
AHC Trailside has covenanted to maintain a positive tangible net
worth (which is defined as the excess of total assets over total
liabilities, excluding from the determination of assets any
items that are treated as intangibles in conformity with GAAP)
at all times. AHC Trailside is also prohibited from creating,
incurring, assuming or guaranteeing, or permitting to exist, or
becoming or remaining liable upon any additional indebtedness
(with typical exceptions for items incurred in the ordinary
course of operating the SNH Properties). AHC&nbsp;Trailside may
not engage in any trade or business other than the leasing and
operating of the SNH&nbsp;Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
It is an event of default if there is any direct or indirect
change in control of AHC Trailside or Alterra without consent. A
change of control includes (i)&nbsp;the acquisition by any
person, or group of persons acting in concert, of record
ownership of, or the right to vote, or the power to direct the
vote of, in excess of 50% of the voting power of the outstanding
shares of voting stock of AHC Trailside
</DIV>

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<DIV align="left" style="font-size: 10pt;">
or Alterra, (ii)&nbsp;the merger or consolidation of AHC
Trailside or Alterra with or into any other person,
(iii)&nbsp;any one or more sales or conveyances to any person of
all or substantially all of its assets or business of AHC
Trailside or Alterra, and (iv)&nbsp;a change in majority of AHC
Trailside&#146;s or Alterra&#146;s board of directors (excluding
changes where a new director is elected or approved by a
majority of the board in office on the effective date of
Alterra&#146; Plan of Reorganization or previously so elected or
approved); provided, however, that no change of control shall be
deemed to have occurred as a result or arising out of any
acquisition referred to in clause&nbsp;(i) immediately above
with respect to the voting power of the outstanding shares of
voting stock of any parent of AHC Trailside so long as such
parent is a guarantor and at the time of such acquisition and
immediately thereafter such parent has a consolidated tangible
net worth at least equal to $50.0&nbsp;million. Following the
purchase of FIT REN LLC by Alterra, as described in
&#147;Business&nbsp;&#151; History,&#148; Alterra had a net
worth in excess of $50.0&nbsp;million and remained a guarantor
of the SNH Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A default pertaining to one facility under the SNH&nbsp;Lease
causes a default with respect to all facilities covered by the
SNH Lease. In addition, the following constitute an event of
default under the SNH Lease: (i)&nbsp;if any obligation of AHC
Trailside in respect of any indebtedness for money borrowed or
material property or services, or any guaranty related thereto
becomes due prior to maturity; and (ii)&nbsp;a material default
by AHC Trailside, Alterra or any of their affiliates under the
other documents relating to the SNH Portfolio (e.g., the
purchase agreement, stock pledge agreement, guaranty, etc.).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>LTC&#146;s Master Lease Arrangement with Alterra</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective January&nbsp;1, 2003, individual leases on 35 of the
residences that were previously leased by Alterra from LTC
Properties, Inc., or LTC, and its affiliates were either
terminated or amended and restated, and Alterra entered into
four separate leases or the LTC Master Leases, which we are now
parties to or have guaranteed, with LTC and its affiliates with
respect to such residences. The term of the LTC Master Leases
expires on December&nbsp;31, 2020, or the LTC Initial Term. We
have two ten-year renewal options, each a LTC Extended Term,
under the LTC Master Leases. LTC, at its option upon meeting
certain conditions precedent, may cause Alterra and the Company
to consolidate the LTC Master Leases into a single master lease
on substantially the same terms and conditions as the LTC Master
Leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Aggregate current LTC Initial Term Minimum Rent is
$9.3&nbsp;million per annum. The LTC Initial Term Minimum Rent
increases annually to an amount equal to the LTC Initial Term
Minimum Rent for the prior lease year plus an amount determined
by multiplying the prior year&#146;s LTC Initial Term Minimum
Rent by the increase in the consumer price index, subject to a
2% cap. For any year in which the increase is more than 2%, such
excess is applied to any prior or future year in which the
increase in the consumer price index was less than 2%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The minimum rent payable at the commencement of the first LTC
Extended Term shall be the greater of (i)&nbsp;the previous
year&#146;s minimum rent increased by 2%, and (ii)&nbsp;the
minimum rent during the first lease year of the Initial Term
multiplied by a fraction, the numerator of which is the consumer
price index as of the commencement date of the first LTC
Extended Term and the denominator of which is the consumer price
index as of the LTC Initial Term commencement date. In no event
shall the minimum rent for the first year of the first LTC
Extended Term exceed 15% or more of the amount of minimum rent
at the end of the LTC Initial Term. The initial minimum rent
payable during the second LTC Extended Term shall be the greater
of (a)&nbsp;the minimum rent payable during the last
12&nbsp;months of the previous LTC Extended Term increased by
2%, (b)&nbsp;the fair market rent as determined pursuant to the
terms of the LTC Master Leases, and (c)&nbsp;the minimum rent
during the first lease year of the first LTC Extended Term
multiplied by a fraction, the numerator of which is the consumer
price index as of the commencement date of the second LTC
Extended Term and the denominator of which is the consumer price
index as of the commencement date of the first LTC Extended
Term. In no event shall the minimum rent for the first year of
the second LTC Extended Term exceed by 15% or more the amount of
minimum rent at the end of the first LTC Extended
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Term. The minimum rent during any LTC Extended Term increases
annually in the same manner as during the LTC Initial Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
LTC agreed to provide us (provided certain conditions were met)
with $2.5&nbsp;million for capital expenditures over the three
year period following December 2003, and up to an additional
$2.5&nbsp;million over the following three year period for
expansions of the LTC Properties. If such funds are advanced,
LTC Initial Term Minimum Rent will thereafter be increased by an
amount equal to 10% of all such funds advanced.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
LTC Master Leases are triple net and we are responsible for the
payment of all taxes, assessments, utility expenses, insurance
premiums and other expenses relating to the operation of the LTC
Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The LTC Master Leases prohibit any assignment of the
lessee&#146;s interest in the lease without LTC&#146;s consent.
In addition, the LTC Master Leases prohibit any change of
control without LTC&#146;s consent. A change of control includes
the following: (i)&nbsp;any change in the person which
ultimately exerts effective control over the management of the
affairs of the tenant under the LTC leases, or LTC Tenant (which
person is deemed to be the Company); (ii)&nbsp;any person or
persons is or becomes the beneficial owner, directly or
indirectly, of securities of LTC Tenant and/or the Company,
whether by operation of law or otherwise, representing thirty
percent (30%) or more of the combined voting power of the then
outstanding securities of LTC Tenant and/or the Company;
(iii)&nbsp;the stockholders of LTC Tenant or the Company approve
a merger or consolidation of LTC Tenant or the Company with any
other corporation, other than a merger or consolidation which
would result in the voting securities of LTC Tenant or the
Company (as applicable) which are outstanding immediately prior
thereto continuing to represent more than fifty percent (50%) of
the combined voting power of the voting securities of LTC Tenant
or the Company or such surviving entity immediately after such
merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of LTC
Tenant or the Company (or similar transaction) in which no
person acquires more than thirty percent (30%) of the combined
voting power of the then outstanding securities of LTC Tenant
and/or the Company shall not constitute a change of control; or
(iv)&nbsp;the stockholders of LTC Tenant or the Company approve
a plan of complete liquidation of LTC Tenant or the Company (as
applicable) or an agreement for the sale or disposition by LTC
Tenant or the Company of all or substantially all of the assets
of LTC Tenant or the Company, provided, a change of control
shall not constitute an event of default if at all times the
Company has an audited consolidated tangible net worth equal to
or greater than $150.0&nbsp;million and has issued or
outstanding securities which are publicly traded on the New York
Stock Exchange, American Stock Exchange or NASDAQ. In addition,
upon the payment of certain waiver fees, the Company having a
net worth of between $50.0&nbsp;million and $150.0&nbsp;million
shall not constitute an event of default under the LTC Master
Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are obligated to comply with terms of all mortgages and have
the right (but not obligation) to cure LTC&#146;s defaults to a
mortgagee on behalf of LTC and to offset rental payments to LTC
by amounts expended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under two of the LTC Master Leases containing 25 of the
facilities, if LTC Tenant (or any of its affiliates) commits an
event of default under any other lease or sublease entered into
between LTC (or any of its affiliates) and the LTC Tenant (or
any of its affiliates), such event of default will be a default
under each respective LTC Master Lease. The other two LTC Leases
are not cross-defaulted against each other but are
cross-defaulted against the two LTC Master Leases containing the
25 facilities. In addition, a default pertaining to one facility
covered by an LTC Master Lease is a default with respect to all
facilities covered by such LTC Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>NHP&#146;s Master Lease Arrangement with Alterra</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2002, Alterra entered into a single master lease, or
the NHP Master Lease, with NHP and its affiliates with respect
to 57&nbsp;facilities which included six facilities that were
previously leased by Alterra from Meditrust. Of the entire
original NHP-Alterra portfolio, six additional facilities were
not
</DIV>

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<DIV align="left" style="font-size: 10pt;">
included in the master lease due to underlying ground leases or
bond related indebtedness, and Alterra is obligated to amend the
master lease to add such facilities when consents are obtained.
One of the six facilities was added to the NHP Master Lease in
June 2005. Since the time of entry into the master lease, six
facilities have been sold. As a result, 52&nbsp;facilities, or
the NHP Properties, remain under the master lease. The Company
has guaranteed the payment and performance of all of
Alterra&#146;s obligations under the NHP Lease. Alterra is
required to maintain unrestricted cash and/or availability under
lines of credit or revolving loan agreements in the aggregate
amount of at least $10.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The NHP Master Lease expires on December&nbsp;31, 2021, or the
NHP Initial Term. Alterra has two ten-year renewal options, each
a NHP Renewal Term, under the NHP Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra is obligated to pay, on a monthly basis, base rent, as
the same may be increased from time to time, the NHP Base Rent,
in an amount equal to approximately $20.0&nbsp;million per annum
plus NHP Base Rent was to increase upon disbursements of any
subsequent amounts by NHP to Alterra to fund the cost of capital
improvements at the NHP Properties within three years of
April&nbsp;9, 2002, as described in the NHP Master Lease, up to
$4.0&nbsp;million, or the CapEx Funds. The rental increase would
be the product of (a)&nbsp;the amount of such CapEx Funds
disbursed, and (b)&nbsp;a percentage equal to the greater of
(i)&nbsp;11.5%&nbsp;per annum and (ii)&nbsp;NHP&#146;s then
market lease rate, not to exceed 13%&nbsp;per annum. In
addition, Alterra is obligated to pay, on a quarterly basis,
additional rent, as the same may be increased from time to time,
the NHP Additional Rent, and together with the NHP Base Rent,
collectively, the NHP Rent, in an amount equal to 16% of the
amount by which gross revenues of the NHP Properties for the
applicable quarter exceed one-fourth of the gross revenues of
the NHP Properties for the 2002 calendar year for the initial
term. Base year for renewal terms is the first year of the
applicable renewal term. The current NHP Rent is
$20.4&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The NHP Base Rent increases at the beginning of each NHP Renewal
Term in an amount equal to the product of (a)&nbsp;3.0% over the
ten year United States treasury rate as determined immediately
prior to the tenant&#146;s notice of election to renew and
(b)&nbsp;the greater of (i)&nbsp;the fair market value of the
NHP Properties on the date Alterra sent NHP notice of its
election to extend the term of the NHP Master Lease or
(ii)&nbsp;NHP&#146;s cost of acquiring the NHP Properties, which
was approximately $172.9&nbsp;million, plus the CapEx Funds plus
any other amount for alterations or other amounts funded by NHP
in accordance with the NHP Master Lease, less any amount
received by NHP in connection with any sales of the NHP
Properties, NHP&#146;s receipt of condemnation proceeds in
connection with a public taking of a portion of any of the NHP
Properties or any other net capital proceeds received by NHP
with respect to any of the NHP Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The total amount of NHP Rent paid in any year shall not be less
than the total amount of NHP Rent paid in the prior year. The
increase in the NHP Rent due during any year shall not exceed
more than 2.7% of the NHP Rent from the prior year other than in
connection with the first year of a NHP Renewal Term where the
increase in the NHP Rent shall not exceed 15% of the prior year.
To the extent the increase in the NHP Rent from one year to the
next would otherwise exceed 2.7%, such excess over 2.7% is
carried forward and applied to future years in which the rent
increases for such year would be below such capped amount. To
the extent that the increase in the NHP Rent in the first year
of an NHP Renewal Term would otherwise exceed 15%, such excess
over 15% is carried forward and evenly divided over the months
of the subsequent NHP Renewal Term to the extent the increase in
such subsequent renewal term is less than 15%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra is required to maintain with NHP cash and/or letters of
credit as a security deposit for the performance of its
obligations under the NHP Master Lease in an amount not less
than approximately $4.8&nbsp;million. Tenant has an obligation
to replace cash with letters of credit when letters of credit
become available to Tenant on commercially reasonable terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
NHP Rent is a net rent payable to NHP, with Alterra responsible
for the payment of all taxes, assessments, utility expenses,
insurance premiums and other expenses relating to the operation
of the NHP Properties. Alterra has covenanted to keep the NHP
Properties in good condition and
</DIV>

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<DIV align="left" style="font-size: 10pt;">
repair. The NHP Master Lease also requires Alterra to make
annual expenditures at each NHP property to upgrade the NHP
Properties ranging between $150-$200 per unit, which amounts
will be increased annually by the percent increase in the
consumer price index.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra is obligated to operate each of the NHP Properties in
compliance with a scheduled required bed count. Alterra may
permit, at any one time, the number of beds or living units, as
applicable, at no more than 30 individual NHP Properties (and
not in the aggregate) to be one bed or unit less than the
required bed count for such property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A material default by Alterra or any affiliate of Alterra under:
(i)&nbsp;the letter of credit agreement, (ii)&nbsp;the NHP
Master Lease, the JER I Master Lease, the JER II Master Lease,
and the individual leases for Union Park, Albany, Forest Grove,
McMinnville, and Mt.&nbsp;Hood, or the NHP Designated Leases,
(iii)&nbsp;any other lease, agreement or obligation between
Alterra or any affiliate of Alterra and NHP or any of their
affiliates, which is not cured within any applicable cure period
specified therein or (iv)&nbsp;any other obligation which
affects the Premises which material default has not been waived
or cured in accordance with the applicable agreement shall
constitute a default under the NHP Master Lease. In addition,
any default pertaining to a single facility constitutes an event
of default with respect to all facilities covered by the NHP
Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The NHP Master Lease prohibits the assignment of Alterra&#146;s
interest in the NHP Master Leases without NHP&#146;s consent.
There are no restrictions on changes of ownership in Company nor
restrictions on the Company&#146;s ability to merge or engage in
a business combination, so long as the Company has a
consolidated net worth equal to or greater than
$100.0&nbsp;million and otherwise complies with any applicable
licensing requirements arising out of such change of ownership,
merger or business combination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra has agreed that during the term of the NHP Master Lease
and for one year thereafter, neither Alterra nor any of its
affiliates will, without the prior written consent of NHP,
(a)&nbsp;operate, own, participate in or otherwise receive
revenues from any other business providing services similar to
those at any of the NHP Properties within an eight mile radius
of each property, though Alterra and its affiliates may continue
to operate, own, manage, participate in or otherwise receive
revenues from certain expressly exempt facilities so long as no
aspects of the operations or management of such other facility
are changed in a manner that will result in the other facility
becoming more competitive with the NHP Properties;
(b)&nbsp;recommend or solicit the removal or transfer of any
residents or patients to any other facility owned or operated by
Alterra or its affiliates, unless necessary to provide an
alternate level of care not provided within the proximate NHP
Property; or (c)&nbsp;employ any management or supervisory
personnel working on or in connection with any portion of the
NHP Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>JER I&#146;s Master Lease Arrangement with Alterra</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In April 2002, ALS Leasing, Inc. and Assisted Living Properties,
Inc, each wholly owned subsidiaries of Alterra, or the
JER&nbsp;I Tenant, entered into a single master lease, or the
JER I Master Lease, with JER&nbsp;I. The JER&nbsp;I Master Lease
currently covers 37&nbsp;assisted living and memory care
properties, or the JER&nbsp;I Properties. Alterra agreed to
guaranty the payment of all amounts due by JER&nbsp;I Tenant
under the JER&nbsp;I Master Lease. The Company has guaranteed
the payment and performance of all of Alterra&#146;s obligations
under the JER&nbsp;I Master Lease. Alterra is required to
maintain unrestricted cash and/or availability under lines of
credit or revolving loan agreements in the aggregate amount of
at least $10.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The JER&nbsp;I Master Lease is for an initial term of
approximately 18&nbsp;years and expires on December&nbsp;31,
2020, or the JER&nbsp;I Initial Term. JER&nbsp;I Tenant has two
ten-year renewal options, each a JER&nbsp;I Renewal Term, under
the JER&nbsp;I Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The JER&nbsp;I Tenant is obligated to pay an initial term base
rent, or the JER&nbsp;I Initial Term Base Rent, of approximately
$10.8&nbsp;million per annum (which represents JER&nbsp;I&#146;s
original investment in the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
JER&nbsp;I Properties of approximately $96.4&nbsp;million (as
reduced to approximately $94.4&nbsp;million based upon the
consummation of the sale of six properties and as the same may
be further increased or decreased pursuant to the terms of the
JER&nbsp;I Master Lease), or JER I&#146;s Investment, multiplied
by a rate of 11.5%, or the Initial Term Base Rate, as the same
is increased each year as provided below). Concurrently with any
adjustment to JER I&#146;s Investment, the base rent for the
balance of the applicable lease year and term is recalculated
and reset based on such adjustment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The JER&nbsp;I Initial Term Base Rate increases at the beginning
of each year in an amount equal to the Initial Term Base Rate
plus the increase in the consumer price index (as calculated
pursuant to the terms of the lease) not to exceed .30% for the
first four lease years and .25% for the 5th&nbsp;lease year and
each lease year thereafter during the JER&nbsp;I Initial Term.
The current Initial Term Base Rate is 12.40% and the JER&nbsp;I
Initial Term Base Rent payable is approximately
$11.1&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Renewal term base rent, or the JER&nbsp;I Renewal Term Base
Rent, shall be in an annual amount equal to the product of the
greater of (a)&nbsp;(i)&nbsp;JER&nbsp;I&#146;s Investment in the
JER&nbsp;I Properties on the exercise date of such JER&nbsp;I
Renewal Term and (ii)&nbsp;the fair market value of the
JER&nbsp;I Properties on such date and (b)&nbsp;629&nbsp;basis
points over the ten-year U.S.&nbsp;treasury rate in effect on
the exercise date, or the JER&nbsp;I Renewal Term Base Rate. The
JER&nbsp;I Renewal Term Base Rate shall increase at the
beginning of each year in an amount equal to the JER&nbsp;I
Renewal Term Base Rate in effect in the immediately preceding
lease year plus the increase in the consumer price index not to
exceed .25% in any year. In no event shall the JER&nbsp;I
Renewal Term Base Rent for the first lease year of any
JER&nbsp;I Renewal Term exceed 125% or be less than 100% of the
base rent due for the last lease year of the JER&nbsp;I Initial
Term or the preceding JER&nbsp;I Renewal Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
JER&nbsp;I Tenant is also required to pay amounts due and
payable in connection with the financing of the Wynwood of
Manlius property directly to JER&nbsp;I &#146;s lender. Any
amounts paid by JER&nbsp;I Tenant in any calendar month in
connection with the Manlius Property financing are credited
against the amount of JER&nbsp;I Initial Term Base Rent payable
in such month provided certain conditions are met.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
JER&nbsp;I Tenant is required to make monthly escrows of taxes
equal to 1/12 of the estimated annual taxes due and make monthly
escrow payments for a capital expenditure reserve in an amount
equal to 1/12 of (i)&nbsp;$250 (as adjusted each year for
increases in the consumer price index (as calculated pursuant to
the terms of the lease), multiplied by (ii)&nbsp;the aggregate
number of living units or beds in all of the JER&nbsp;I
Properties on the date the payment is due. Both the tax escrow
and the capital expenditure reserve are held by JER&nbsp;I in
interest bearing accounts. JER&nbsp;I retains amounts remaining
in the capital expenditure reserve at the expiration or earlier
termination of the term as supplemental rent. There is no
requirement for an insurance escrow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
JER&nbsp;I Tenant shall maintain with JER&nbsp;I the amount of
approximately $2.7&nbsp;million, comprised of approximately
$2.5&nbsp;million of cash and $243,200 represented by letters of
credit, as a security deposit for the performance of JER&nbsp;I
Tenant&#146;s obligations under the JER&nbsp;I Master Lease.
Tenant has an obligation to replace cash with letters of credit
when letters of credit become available to Tenant on
commercially reasonable terms. All interest earned on the cash
portion of the security deposit is added to and becomes a part
of the capital expenditure reserve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If at any time the coverage ratio, which is the ratio of
(i)&nbsp;the net income of JER&nbsp;I Tenant for any applicable
fiscal quarter, adjusted to add interest expenses, income tax
expenses, depreciation and amortization expenses, rental
expenses, and management fee expenses to (ii)&nbsp;the amount of
minimum rent for the JER&nbsp;I Properties and debt service due
with respect to the Manilus property payable for any applicable
fiscal quarter, falls below 1.4:1.0, and there is any material
suspension, termination or restriction placed upon the
JER&nbsp;I Tenant or the JER&nbsp;I Properties that continues
for more than 60&nbsp;days, or a Sixty Day Inference, such event
shall constitute an event of default under the JER&nbsp;I Master
Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
JER&nbsp;I Tenant is obligated to operate each of the JER&nbsp;I
Properties in compliance with a scheduled required bed count.
JER&nbsp;I Tenant may permit, at any one time, the number of
beds or
</DIV>

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<DIV align="left" style="font-size: 10pt;">
units at no more than 20 individual JER&nbsp;I Properties (and
not in the aggregate) to be one bed or unit less than the
required bed count for such property. JER&nbsp;I Tenant shall
not allow the average occupancy for any trailing three month
period to (i)&nbsp;drop below 40% of the required unit/bed count
for more than 4&nbsp;properties if the coverage ratio is less
than 1.0:1.0 or (ii)&nbsp;allow the overall occupancy for the
entire portfolio to be less than 65% of the required unit/bed
count.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A default by JER&nbsp;I Tenant or any guarantor or any affiliate
of either under (i)&nbsp;the documents applicable to the
JER&nbsp;I Portfolio (e.g., the guaranty, letter of credit
agreement and stock pledge agreement), (ii)&nbsp;the NHP
Designated Leases, (iii)&nbsp;any other lease, agreement or
obligation between JER&nbsp;I Tenant or any guarantor or any
affiliate of either and JER&nbsp;I or any of its affiliates,
which is not cured within any applicable cure period specified
therein, or (iv)&nbsp;any other obligation in excess of
$1.0&nbsp;million under any other lease or financing agreement
with any other party and with respect to which such party has
accelerated such obligation or has otherwise exercised any
material remedy as a result of such material default that has
not been cured or waived, shall constitute an event of default
under the JER&nbsp;I Master Lease. In addition, any default
pertaining to a single facility constitutes an event of default
with respect to all facilities covered by the JER&nbsp;I Master
Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon (a)&nbsp;the failure to perform or comply with the
provisions of, or a breach or default under, the section of the
JER&nbsp;I Master Lease relating to regulatory compliance (a
loss of licensure), (b)&nbsp;the closure of any material portion
of the business, (c)&nbsp;the sale or transfer of all or any
portion of any certificate of need, bed rights or other similar
certificate or license relating to any portion of the business
or properties, (d)&nbsp;the use of any portion of the JER&nbsp;I
Properties other than for a licensed facility engaged in the
applicable business and for ancillary services relating thereto,
or (e)&nbsp;a Sixty Day Inference occurs JER&nbsp;I shall have
the right to put, or the PUT, the applicable JER&nbsp;I Property
to the JER&nbsp;I Tenant and/or petition any appropriate court
for the appointment of a receiver to manage the operation of the
JER&nbsp;I Property. If JER&nbsp;I exercises the PUT, JER&nbsp;I
Tenant shall purchase the applicable portion of the JER&nbsp;I
Property from JER&nbsp;I for a cash price equal to the greater
of (a)&nbsp;JER&nbsp;I&#146;s investment with respect to such
property plus the product of JER&nbsp;I&#146;s investment and
the current JER&nbsp;I Initial Term applicable rate or
JER&nbsp;I Renewal Term applicable rate, as applicable, and
(b)&nbsp;fair market value on the date of JER&nbsp;I&#146;s
exercise of the PUT without taking into account the event of
default, plus, in either case, all of JER&nbsp;I&#146;s costs
and expenses related to the PUT.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
JER&nbsp;I Master Lease is triple net with JER&nbsp;I Tenant
responsible for the payment of all taxes, assessments, utility
expenses, insurance premiums and other expenses relating to the
operation of the JER&nbsp;I Properties. JER&nbsp;I is
responsible for certain maintenance costs at the JER&nbsp;I
Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The JER&nbsp;I Master Lease prohibits the assignment of
JER&nbsp;I Tenant&#146;s interest in the JER&nbsp;I Master Lease
without JER&nbsp;I&#146;s consent. There are no restrictions on
changes of ownership in the Company nor restrictions on the
Company&#146;s ability to merge or engage in a business
combination, so long as the Company has a consolidated net worth
equal to or greater than $100.0&nbsp;million and otherwise
complies with any applicable licensing requirements arising out
of such change of ownership, merger or business combination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
JER&nbsp;I Tenant and Alterra have agreed that during the term
of the JER&nbsp;I Master Lease and for one year thereafter,
neither JER&nbsp;I Tenant, Alterra nor any of their affiliates
will (i)&nbsp;operate, own participate in or otherwise receive
revenues from any other business providing services similar to
those at any of the JER&nbsp;I Properties within an eight mile
radius of each property, though JER&nbsp;I Tenant and their
affiliates may continue to operate, own, manage, participate in
or otherwise receive revenues from certain expressly exempt
facilities so long as no aspects of the operations or management
of such other facility are changed in a manner that will result
in the other facility becoming more competitive with the
JER&nbsp;I Properties, (ii)&nbsp;recommend or solicit the
removal or transfer of any residents or patients to any other
facility owned or operated by the JER&nbsp;I Tenant or its
affiliates, unless necessary to provide an alternate level of
care not provided within the proximate JER&nbsp;I Property, or
(iii)&nbsp;employ any management or supervisory personnel
working on or in connection with any portion of the JER&nbsp;I
Properties.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>JER&nbsp;II&#146;s Master Lease Arrangement with
Alterra</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2002, JER&nbsp;II leased nine residences to ALS
Leasing, Inc., or JER&nbsp;II Tenant, in a single master lease,
or the JER&nbsp;II Master Lease. The JER&nbsp;II Master Lease is
for an initial term of approximately 18&nbsp;years and expires
on December&nbsp;31, 2020, or the JER&nbsp;II Initial Term.
JER&nbsp;II Tenant has two ten-year renewal options, each a
JER&nbsp;II Renewal Term, under the JER&nbsp;II Master Lease.
The Company has guaranteed the payment and performance of all of
Alterra&#146;s obligations under the JER&nbsp;II Master Lease.
Alterra is required to maintain unrestricted cash and/or
availability under lines of credit or revolving loan agreements
in the aggregate amount of at least $10.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The JER&nbsp;II Tenant is obligated to pay an initial term base
rent, or the JER&nbsp;II Initial Term Base Rent, of
approximately $3.2 (which represents JER&nbsp;II&#146;s original
investment in the JER&nbsp;II Properties of approximately
$28.8&nbsp;million multiplied by a rate of 11.5%, (or the
Initial Term Base Rate), decreased by $0.4&nbsp;million (and as
the same may be further increased or decreased pursuant to the
terms of the JER&nbsp;II Master Lease), or JER&nbsp;II&#146;s
Investment, as the same is increased each year as provided
below). The $750,000 security deposit is included in
JER&nbsp;II&#146;s original investment until the JER&nbsp;II
Tenant fully funds the security deposit. JER&nbsp;II Tenant has
an obligation to replace cash with letters of credit when
letters of credit become available to Tenant on commercially
reasonable terms. All interest earned on the cash security
deposit is added to and becomes a part of the capital
expenditure reserves. Concurrently with any adjustment to
JER&nbsp;II&#146;s Investment, the base rent for the balance of
the applicable lease year and term is recalculated and reset
based on such adjustment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The JER&nbsp;II Initial Term Base Rate increases at the
beginning of each year in an amount equal to the Initial Term
Base Rate plus the increase in the consumer price index (as
calculated pursuant to the terms of the Lease) not to exceed
..30% for the first four lease years, and .25% for the fifth
lease year and each lease year thereafter during the JER&nbsp;II
Initial Term. The current Initial Term Base Rate is 12.4% and
the JER&nbsp;II Initial Term Base Rent payable is
$3.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Renewal term base rent, or JER&nbsp;II Renewal Term Base Rent,
shall be in an annual amount equal to the product of
(a)&nbsp;the greater of (i)&nbsp;JER&nbsp;II&#146;s Investment
in the JER&nbsp;II Properties on the exercise date of such
JER&nbsp;II Renewal Term and (ii)&nbsp;the fair market value of
the JER&nbsp;II properties on such date, and
(b)&nbsp;788&nbsp;basis points over the ten-year
U.S.&nbsp;treasury rate in effect on the exercise date, or the
JER&nbsp;II Renewal Term Base Rate. The JER&nbsp;II Renewal Term
Base Rate shall increase at the beginning of each year in an
amount equal to the JER&nbsp;II Renewal Term Base Rate in effect
in the immediately preceding lease year plus the increase in the
consumer price index (as calculated pursuant to the terms of the
Lease), not to exceed .25% in any year. In no event shall the
JER&nbsp;II Renewal Term Base Rent for the first lease year of
any JER&nbsp;II Renewal Term exceed 125% or be less than 100% of
the base rent due for the last lease year of the JER&nbsp;II
Initial Term or the preceding JER&nbsp;II Renewal Term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon execution of the JER&nbsp;II Master Lease, JER&nbsp;II
Tenant deposited $103,022 in a tax escrow with JER&nbsp;II.
JER&nbsp;II Tenant is required to make monthly escrows of taxes
in an amount equal to 1/12 of the estimated annual taxes due and
JER&nbsp;II Tenant is required to make monthly escrow payments
for a capital expenditure reserve in an amount equal to 1/12 of
(i)&nbsp;$250 (as adjusted each year for increases in the
consumer price index), multiplied by (ii)&nbsp;the aggregate
number of living units or beds in all of the JER&nbsp;II
Properties on the date the payment is due. Both the tax escrow
and the capital expenditure reserve are held by JER&nbsp;II in
interest bearing accounts. JER&nbsp;II retains amounts remaining
in the capital expenditure reserve at the expiration or earlier
termination of the term as supplemental rent. There is no
requirement for insurance escrows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If at any time the coverage ratio (which is the ratio of
(i)&nbsp;the net income of JER&nbsp;II Tenant for any applicable
fiscal quarter, adjusted to add interest expenses, income tax
expenses, depreciation and amortization expenses, rental
expenses, and management fee expenses, to (ii)&nbsp;the amount
of minimum rent payable for any applicable fiscal quarter, falls
below 1.4:1.0 and there is any material suspension, termination
or restriction placed upon the JER&nbsp;II Tenant or the
JER&nbsp;II Properties that
</DIV>

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<DIV align="left" style="font-size: 10pt;">
continues for more than 60&nbsp;days (a &#147;Sixty Day
Inference&#148;), such event shall constitute an event of
default under the JER&nbsp;II Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
JER&nbsp;II Tenant is obligated to operate each of the
JER&nbsp;II Properties in compliance with a scheduled required
bed count. JER&nbsp;II Tenant may permit at any one time the
number of beds at no more than an aggregate of five individual
JER&nbsp;II Properties to be one bed less than the required bed
count for such property. JER&nbsp;II Tenant shall not
(i)&nbsp;allow the average occupancy for any trailing three
month period to drop below 40% of the required bed count for
more than two properties if the debt service coverage ratio is
less than 1.0:1.0, or (ii)&nbsp;allow the overall occupancy for
the entire portfolio to be less than 65% of the required bed
count.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following shall constitute an event of default under the
JER&nbsp;II Master Lease: (i)&nbsp;a default under the NHP
Designated Leases or the Purchase and Sale Agreement among
JER&nbsp;II, ALS Holdings, Inc. and ALS National, Inc. prior to
closing, (ii)&nbsp;a default by the JER&nbsp;II Tenant or any
guarantor or any affiliate under the documents applicable to the
JER&nbsp;II Portfolio (e.g., the letter of credit agreement,
guaranty and stock pledge agreement), (iii)&nbsp;a default by
JER&nbsp;II Tenant or any guarantor or any affiliate under any
other lease, agreement or obligation between JER&nbsp;II Tenant
or any guarantor or any affiliate thereunder and JER&nbsp;II or
any of its affiliates (including the Purchase Agreement with
respect to any default by ALS Holdings, Inc. and ALS National,
Inc., which is not cured within any applicable cure period
specified therein), or (iv)&nbsp;a default by JER II Tenant or
any guarantor or any affiliate under any obligation in excess of
$1.0&nbsp;million under any other lease or financing agreement
with any other party and with respect to which such party has
accelerated such obligation or has otherwise exercised any
material remedy as a result of such material default that has
not been cured or waived. In addition, any default pertaining to
a single facility constitutes an event of default with respect
to all facilities covered by the JER&nbsp;II Master Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon (a)&nbsp;the failure to perform or comply with the
provisions of, or a breach or default under the JER&nbsp;II
Master Lease section regarding regulatory compliance (loss of
licensure), (b)&nbsp;the closure of any material portion of the
business, (c)&nbsp;the sale or transfer of all or any portion of
any certificate of need, bed rights or other similar certificate
or license relating to any portion of the business or
properties, (d)&nbsp;the use of any portion of the JER&nbsp;II
Properties other than for a licensed facility engaged in the
applicable business and for ancillary services relating thereto
or (e)&nbsp;a Sixty&nbsp;Day Inference occurs JER&nbsp;II shall
have the right to put, or PUT, the applicable JER&nbsp;II
Property to the JER&nbsp;II Tenant and/or petition any
appropriate court for the appointment of a receiver to manage
the operation of the JER&nbsp;II Property. If JER&nbsp;II
exercises the PUT, JER&nbsp;II Tenant shall purchase the
applicable portion of the JER&nbsp;II Property from JER&nbsp;II
for a cash price equal to the greater of (A)&nbsp;JER I&#146;s
investment with respect to such property plus the product of
JER&nbsp;II&#146;s investment and the current JER&nbsp;II
Initial Term applicable rate or JER&nbsp;II Renewal Term
applicable rate, as applicable, and (B)&nbsp;fair market value
on the date of JER&nbsp;II&#146;s exercise of the PUT without
taking into account the event of default, plus, in either case,
all of JER&nbsp;II&#146;s costs and expenses related to the PUT.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The JER&nbsp;II Master Lease is triple net with JER&nbsp;II
Tenant responsible for the payment of all taxes, assessments,
utility expenses, insurance premiums and other expenses relating
to the operation of the JER&nbsp;II Properties. JER&nbsp;II is
responsible for certain maintenance costs at the JER&nbsp;II
Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The JER&nbsp;II Master Lease prohibits the assignment of JER I
Tenant&#146;s interest in the JER&nbsp;II Master Lease without
JER&nbsp;II&#146;s consent. There are no restrictions on changes
of ownership in the Company nor restrictions on the
Company&#146;s ability to merge or engage in a business
combination, so long as the Company has a consolidated net worth
equal to or greater than $100.0&nbsp;million and otherwise
complies with any applicable licensing requirements arising out
of such change of ownership, merger or business combination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
JER&nbsp;II Tenant and Alterra have a purchase option with
respect to all, but not part, of the JER&nbsp;II Properties in
the tenth year of the JER&nbsp;II Initial Term for a purchase
price equal to the product of
</DIV>

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<DIV align="left" style="font-size: 10pt;">
JER&nbsp;II&#146;s Investment on the closing date and the
JER&nbsp;II Initial Term Base Rate to be in effect in the
eleventh lease year, divided by 9%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
JER I Tenant and Alterra have agreed that during the term of the
JER&nbsp;II Master Lease and for one year thereafter, neither
JER I Tenant, Alterra nor any of their affiliates will
(i)&nbsp;operate, own, participate in or otherwise receive
revenues from any other business providing services similar to
those at any of the JER&nbsp;II Properties within an eight mile
radius of each property, though JER&nbsp;II Tenant and their
affiliates may continue to operate, own, manage, participate in
or otherwise receive revenues from certain expressly exempt
facilities so long as no aspects of the operations or management
of such other facility are changed in a manner that will result
in the other facility becoming more competitive with the
JER&nbsp;II Properties; (ii)&nbsp;recommend or solicit the
removal or transfer of any residents or patients to any other
facility owned or operated by the JER&nbsp;II Tenant or its
affiliates, unless necessary to provide an alternate level of
care not provided within the proximate JER&nbsp;II Property; or
(iii)&nbsp;employ any management or supervisory personnel
working on or in connection with any portion of the JER&nbsp;II
Properties.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='112'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Directors and Executive Officers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information about our
directors and executive officers as of the consummation of this
offering, together with their positions and ages. Each of our
executive officers holds office until his or her successor is
duly elected or appointed and qualified or until his or her
death, retirement, resignation or removal, if earlier. The
persons listed below will serve as officers of Brookdale as of
the consummation of this offering. Each of our directors holds
office until his or her successor is duly elected or appointed
and qualified or until his or her death, retirement,
disqualification, resignation or removal, if earlier.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Name</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Age</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Position</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wesley R. Edens
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Chairman of the Board of Directors
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark J. Schulte
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">51</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Chief Executive Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark W. Ohlendorf
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">45</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Co-President
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">John P. Rijos
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Co-President
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">R. Stanley Young
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">53</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Executive Vice President and Chief
    Financial Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Kristin A. Ferge
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">32</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Executive Vice President and
    Treasurer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deborah C. Paskin
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">53</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Executive Vice President, Secretary
    and General Counsel
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">William B. Doniger
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Vice Chairman
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Randal A. Nardone
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Wesley R. Edens </B>is the Chairman of our board of directors
and has served in this capacity since August 2005.
Mr.&nbsp;Edens has been a Principal and the Chairman of the
Management Committee of Fortress Investment Group LLC since
co-founding the firm in May 1998. As Chairman of the Management
Committee of Fortress Investment Group, he manages and invests
in other asset-related investment vehicles and serves on the
boards of Fortress Registered Investment Trust and Fortress
Investment Trust&nbsp;II. He is the Chairman of the board of
directors and Chief Executive Officer of Newcastle Investment
Corp., an affiliate of Fortress and a REIT listed on the New
York Stock Exchange. He has also served as a director and the
Chief Executive Officer of Eurocastle Investment Limited, an
affiliate of Fortress which is listed on the London Stock
Exchange, since its inception in 2003, and previously served as
the Chairman of Eurocastle&#146;s board of directors.
Mr.&nbsp;Edens has also served as Chairman of the board of
directors of Global Signal Inc. since its reorganization in
October 2002 and as its Chief Executive Officer since February
2004. He also serves as the Chairman of the board of directors
of Mapeley Limited. In addition, Mr.&nbsp;Edens served as a
director of Capstead Mortgage Corporation beginning in December
1999 and assumed the title of Chairman of the Board, Chief
Executive Officer and President in April 2000 until July 2003
when he resigned from all positions. Mr.&nbsp;Edens was the head
of Global Principal Finance at Union Bank of Switzerland from
May 1997 to May 1998. Prior to joining Union Bank of
Switzerland, Mr.&nbsp;Edens was a Partner and a Managing
Director of BlackRock Financial Management Inc. from October
1993 to May 1997. In addition, Mr.&nbsp;Edens was a Partner and
Managing Director of Lehman Brothers from April 1987 to October
1993. Mr.&nbsp;Edens received a Bachelor of Science in Finance
from Oregon State University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Mark J. Schulte </B>became our Chief Executive Officer in
August 2005. Previously, Mr.&nbsp;Schulte served as Chief
Executive Officer and director of BLC since 1997, and was also
Chairman of the board from September 2001 to June 2005. From
January 1991 to May 1997, he was employed by BLC&#146;s
predecessor company, The Prime Group, Inc., in its Senior
Housing Division, most recently serving as its Executive Vice
President, with primary responsibility for overseeing all
aspects of Prime&#146;s Senior Housing Division.
Mr.&nbsp;Schulte has 25&nbsp;years of experience in the
development and operation of multi-family housing, senior
housing, senior independent and assisted living and health
</DIV>

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<DIV align="left" style="font-size: 10pt;">
care facilities. He is a former Chairman of ASHA and remains on
ASHA&#146;s board of directors. Mr.&nbsp;Schulte received a B.A.
in English and a J.D. from St.&nbsp;Louis University, and is
licensed to practice law in the State of New York.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Mark W. Ohlendorf </B>became our Co-President in August 2005.
Mr.&nbsp;Ohlendorf has also served as Chief Executive Officer
and President of Alterra since December 2003. From January 2003
through December 2003, Mr.&nbsp;Ohlendorf served as Chief
Financial Officer and President of Alterra, and from 1999
through 2002 he served as Senior Vice President and Chief
Financial Officer. Mr.&nbsp;Ohlendorf has over 20&nbsp;years of
experience in the health care and long-term care industries,
having held leadership positions with such companies as Sterling
House Corporation, Vitas Healthcare Corporation and Horizon/ CMS
Healthcare Corporation. He is a member of the board of directors
of the Assisted Living Federation of America (ALFA) and ASHA. He
received a B.A. in Political Science from Illinois Wesleyan
University, and is a certified public accountant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>John P. Rijos </B>became our Co-President in August 2005.
Previously, Mr.&nbsp;Rijos served as President, Chief Operating
Officer and director of BLC since August 2000. Prior to joining
BLC in August 2000, Mr.&nbsp;Rijos spent 16&nbsp;years with Lane
Hospitality Group, owners and operators of over 40 hotels and
resorts, as its President and Chief Operating Officer. From 1981
to 1985 he served as President of High Country Corporation, a
Denver-based hotel development and management company. Prior to
that time, Mr.&nbsp;Rijos was Vice President of Operations and
Development of several large real estate trusts specializing in
hotels. Mr.&nbsp;Rijos has over 25&nbsp;years of experience in
the acquisition, development and operation of hotels and
resorts. He received a B.S. in Hotel Administration from Cornell
University and serves on many tourist-related operating boards
and committees, as well as advisory committees for Holiday Inns,
Sheraton Hotels and the City of Chicago and the Board of
Trustees for Columbia College. Mr.&nbsp;Rijos is a certified
hospitality administrator.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>R.&nbsp;Stanley Young </B>became our Executive Vice President
and Chief Financial Officer in August 2005. Previously,
Mr.&nbsp;Young served as Executive Vice President, Chief
Financial Officer and Treasurer of BLC since December 1999. From
August 1998 to December 1999, Mr.&nbsp;Young was Senior Vice
President&nbsp;&#151; Finance and Treasurer of BLC. From 1977 to
1998, Mr.&nbsp;Young practiced public accounting with KPMG LLP,
where he was admitted to the partnership in 1987. Mr.&nbsp;Young
received a B.A. in Business Administration from Illinois
Wesleyan University, an MBA from the University of Illinois, and
is a certified public accountant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Kristin A. Ferge </B>became our Executive Vice President and
Treasurer in August 2005. Ms.&nbsp;Ferge has also served as Vice
President, Chief Financial Officer and Treasurer of Alterra
since December 2003. From April 2000 through December 2003,
Ms.&nbsp;Ferge served as Alterra&#146;s Vice President of
Finance and Treasurer. Prior to joining Alterra, she worked in
the audit division of KPMG LLP. Ms.&nbsp;Ferge received a B.A.
in Accounting from Marquette University, an MBA from the
University of Wisconsin, and is a certified public accountant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Deborah C. Paskin </B>became our Executive Vice President,
Secretary and General Counsel in August 2005. Previously,
Ms.&nbsp;Paskin served as Senior Vice President, Secretary and
General Counsel of BLC since November 2002. Prior to joining
BLC, from 1999 to 2002, she served as Chief Administrative
Officer, Executive Vice President and General Counsel for Clark
Retail Enterprises, Inc. Prior to that time, she served as
General Counsel for two other Chicago-based companies,
Dominick&#146;s Finer Foods, Inc. and Helene Curtis, Inc. Prior
to that, Ms.&nbsp;Paskin practiced law in the Chicago office of
Latham&nbsp;&#38; Watkins. Ms.&nbsp;Paskin graduated from
Northwestern University School of Law. She also received a
Masters Degree in Library Science from Dominican University and
a B.A. in English from Indiana University in Bloomington,
Indiana.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>William B. Doniger </B>became our Vice Chairman in August
2005. Mr.&nbsp;Doniger is a managing director of Fortress and
oversees United States acquisitions. He joined Fortress in May
1998, prior to which he worked at UBS and, from January 1996
through December 1997, at BlackRock. Prior to
</DIV>

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<DIV align="left" style="font-size: 10pt;">
that, Mr.&nbsp;Doniger was in the structured finance group of
Thacher Proffitt&nbsp;&#38; Wood. Mr.&nbsp;Doniger received an
A.B. in History from Princeton University and a J.D. from
American University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Randal A. Nardone </B>became a member of our board of
directors in June 2005. Mr.&nbsp;Nardone has been a principal
and a member of the Management Committee of Fortress since
co-founding the firm in 1998. Mr.&nbsp;Nardone oversees
Fortress&#146;s structured finance and legal matters. Prior to
joining Fortress, Mr.&nbsp;Nardone was a managing director of
UBS from May 1997 to May 1998, and, prior to that, was a
principal of BlackRock Financial Management Inc. In addition,
Mr.&nbsp;Nardone was a partner and a member of the executive
committee at the law firm of Thacher Proffitt&nbsp;&#38; Wood,
which he joined in 1980, and ran the structured finance group
starting in 1993. Mr.&nbsp;Nardone received a B.A. in English
and Biology from the University of Connecticut and a J.D. from
the Boston University School of Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to our amended and restated certificate of
incorporation and amended and restated by-laws, our board of
directors is divided into three classes of directors. The
current terms of the Class&nbsp;I, Class&nbsp;II and
Class&nbsp;III directors will expire in 2008, 2007 and 2006,
respectively. As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005,
Messrs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;served
as a Class&nbsp;I director,
Messrs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;served
as a Class&nbsp;II director and
Messrs.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;served
as a Class&nbsp;III director. Directors of each class are chosen
for three-year terms upon the expiration of their current terms
and each year one class of directors will be elected by the
stockholders. Our amended and restated by-laws provide that our
board of directors may determine by resolution the number of
directors which constitute our board of directors. On
August&nbsp;8, 2005, the board of directors set the number of
directors which constitutes our board at three, none of whom
have been determined to be &#147;independent,&#148; as defined
under NYSE rules. We plan to have seven&nbsp;directors, at least
four of whom will be determined to be &#147;independent&#148; as
defined under NYSE rules. All officers serve at the discretion
of our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Committees of the Board of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the consummation of this offering, we will establish
the following committees of our board of directors:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Audit Committee</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audit committee:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews the audit plans and findings of our independent
    registered public accounting firm and our internal audit and
    risk review staff, as well as the results of regulatory
    examinations, and tracks management&#146;s corrective action
    plans where necessary;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews our financial statements, including any significant
    financial items and/or changes in accounting policies, with our
    senior management and independent registered public accounting
    firm;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews our risk and control issues, compliance programs and
    significant tax and legal matters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    has the sole discretion to appoint annually our independent
    registered public accounting firm, evaluate its independence and
    performance and set clear hiring policies for employees or
    former employees of the independent registered public accounting
    firm;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews our risk management processes.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The members of the committee have not yet been appointed, We
intend to appoint at least three members that are
&#147;independent&#148; directors as defined under NYSE rules
and Rule&nbsp;10A-3 of the Exchange Act.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Nominating and Corporate Governance Committee</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The nominating and corporate governance committee:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews the performance of our board of directors and makes
    recommendations to the board regarding the selection of
    candidates, qualification and competency requirements for
    service on the board and the suitability of proposed nominees as
    directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    advises the board with respect to the corporate governance
    principles applicable to Brookdale;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    oversees the evaluation of the board and Brookdale&#146;s
    management.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The members of the committee have not yet been appointed. We
intend to appoint at least three members that are
&#147;independent&#148; directors as defined under the NYSE
rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Compensation Committee</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation committee:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews and recommends to the board the salaries, benefits and
    stock option and other equity-related grants for all employees,
    consultants, officers, directors and other individuals we
    compensate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews and approves corporate goals and objectives relevant to
    Chief Executive Officer compensation, evaluates the Chief
    Executive Officer&#146;s performance in light of those goals and
    objectives, and determines the Chief Executive Officer&#146;s
    compensation based on that evaluation;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    oversees our compensation and employee benefit and incentive
    compensation plans.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The members of the committee have not yet been appointed. We
intend to appoint at least three members that are
&#147;independent&#148; directors as defined under the NYSE
rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation Committee Interlocks and Insider
Participation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Compensation decisions during the year ended December&nbsp;31,
2004 pertaining to executive officer compensation were made:
with respect to BLC, by Fortress and Health Partners, following
recommendation by Mark&nbsp;J. Schulte, our chief executive
officer; and with respect to Alterra, by Fortress, following
recommendation by Mark&nbsp;W. Ohlendorf, our co-president. We
have entered into certain transactions with Fortress as
described in &#147;Certain Relationships and Related Party
Transactions.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Compensation of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will pay an annual fee to each independent director equal to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
payable semi-annually. In addition, an annual fee of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
be paid to the chairs of each of the audit and compensation
committees of the board of directors. Fees to independent
directors may be made by issuance of common stock, based on the
value of such common stock at the date of issuance, rather than
in cash, provided that any such issuance does not prevent such
director from being determined to be independent and such stock
is granted pursuant to a stockholder-approved plan or the
issuance is otherwise exempt from any applicable stock exchange
listing requirement. Affiliated directors, however, will not be
separately compensated by us. All members of the board of
directors will be reimbursed for reasonable costs and expenses
incurred in attending meetings of our board of directors.
Following the consummation of this offering, each independent
director will be eligible to receive awards of our shares of
common stock as described in &#147;Equity Incentive
Plans&nbsp;&#151; Omnibus Stock Incentive Plan.&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive Officer Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following summary compensation table sets forth information
concerning the cash and non-cash compensation earned by, awarded
to or paid to our Chief Executive Officer and our four other
most highly compensated executive officers (with their current
positions with us) for services rendered to BLC and Alterra, as
applicable, in 2004. We refer to these executives as our
&#147;named executive officers&#148; in other parts of this
prospectus.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Compensation Table</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Annual Compensation</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Other Annual</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">All Other</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fiscal</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Salary</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Bonus</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Compensation</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Compensation(1)</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Name and Principal Position</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">($)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">($)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">($)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">($)</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark J. Schulte, Chief Executive
    Officer
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">390,150</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">774,588</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,250</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark W. Ohlendorf, Co-President
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">395,186</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">318,800</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,050</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(2)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">John P. Rijos, Co-President
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">364,140</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">774,588</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,250</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">R. Stanley Young, Executive Vice
    President and Chief Financial Officer
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">260,100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">649,776</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,250</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Kristin A. Ferge, Executive Vice
    President and Treasurer
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">215,922</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">115,900</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,050</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deborah C. Paskin, Executive Vice
    President, Secretary and General Counsel
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">255,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">316,319</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Unless indicated otherwise, represents the employer matching
    contribution to the 401(k) plan.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Representing a contribution of $25,000 in the form of premiums
    for a split dollar life insurance policy and $2,050 as the
    employer matching contribution to the 401(k) plan.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equity Incentive Plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Employee Restricted Stock Plans</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BLC and FEBC-ALT Investors adopted substantially similar
employee restricted securities plans, or the Restricted
Securities Plans, effective as of August&nbsp;5, 2005, to
attract, motivate and retain key employees. The Restricted
Securities Plans provide for the grant to those participants
selected by Alterra&#146;s and BLC&#146;s respective boards of
directors, of shares of common stock, in the case of the BLC
plan, and LLC membership interests, in the case of the FEBC-ALT
Investors plan, that are in either case subject to substantial
risk of forfeiture until the occurrence of certain events, as
specified in the applicable restricted securities award
agreements. As a condition for receiving an award under the
Restricted Securities Plans, each participant has entered into
an employment agreement and/or securities agreement to the
extent required by the applicable employer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BLC reserved for issuance under its plan 1,000&nbsp;shares of
its common stock and FEBC-ALT Investors has authorized for
issuance up to 3.33% of its membership interests (such shares of
BLC common stock and such FEBC-ALT Investors membership
interests, collectively, the &#147;Securities&#148;), in each
case, subject to equitable adjustment upon the occurrence of
certain corporate transactions or events. Upon the completion of
the series of formation transactions described in
&#147;Business&nbsp;&#151; History,&#148; pursuant to the terms
of the Restricted Securities Plans, all shares of BLC common
stock and FEBC-ALT membership interests, including the
securities subject to outstanding grants under the plans, were
automatically converted into shares of our common stock. The
vesting schedules of outstanding awards under the plans
continued in effect, except that service with us or any
surviving or continuing entity will be deemed to be continued
service with Alterra or BLC for purposes of these awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each participant&#146;s award was granted pursuant to the terms
of a restricted securities award agreement which set forth the
amount of securities subject to the award, the applicable
vesting schedules and the restrictive covenants by which the
participant would be bound. Messrs. Schulte, Rijos and Young and
Ms. Paskin received all of the rights of a BLC stockholder,
including the right to
</DIV>

<P align="center" style="font-size: 10pt;">115

</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
receive dividends and to vote the shares. Mr.&nbsp;Ohlendorf and
Ms.&nbsp;Ferge were considered members of FEBC-ALT Investors and
had the rights of membership as set forth in the LLC Agreement,
which included the right to receive distributions with respect
to the interests but not the right to vote, until the completion
of the merger transactions described in
&#147;Business&nbsp;&#151; History.&#148; Unless otherwise
provided in an award agreement, if the participant&#146;s
employment is terminated for any reason, the Messrs. Schulte,
Rijos and Young and Ms.&nbsp;Paskin portion of the award subject
to a substantial risk of forfeiture as of the date of
termination would be forfeited. In accordance with the terms of
the plans, a portion of these securities will no longer be
subject to a risk of forfeiture upon the consummation of this
offering. In addition, the remaining securities will vest over a
five-year period following the issuance if the executive remains
continuously employed by the Company. Securities that are
subject to a risk of forfeiture may not be sold or transferred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the issuance on August&nbsp;5, 2005 of
988&nbsp;shares of stock of BLC and 3.33% of the membership
interests of FEBC-ALT Investors to certain executives pursuant
to their respective Restricted Securities Plans, BLC, Alterra
and FEBC-ALT Investors received valuation letters from an
independent firm, calculated based upon the non-marketable,
minority interest characteristics of these securities as of the
date of such letters. The valuation letter delivered to BLC
indicated a non-marketable, minority interest basis equity value
per share of $12,416 per share. The valuation letter delivered
to Alterra and FEBC-ALT Investors indicated a non-marketable,
minority interest basis equity value of $1.2&nbsp;million per 1%
interest in Alterra.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The aggregate value of these securities at the date of issuance,
based on this valuation, was $16.3&nbsp;million. In arriving at
the value of these securities, the independent firm was directed
not to reflect any potential cost savings or synergies relating
to the merger transactions or any premium relating to any
potential initial public offering of our common stock. These
securities were exchanged in the merger transactions for an
aggregate of 2,577,652&nbsp;shares of the Company. The aggregate
value of these shares based upon the midpoint of the price range
set forth on the cover page of this prospectus is
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Restricted Securities Plans are administered by our board of
directors, which has full power to construe and interpret the
plans and any outstanding awards, including, without limitation,
to determine whether, to what extent, and under what
circumstances an award may be settled, canceled, forfeited,
exchanged, or surrendered, to remedy any ambiguities and
inconsistencies in the plans, to prescribe, amend and rescind
rules and regulations relating to the plans, and to make all
other determinations deemed necessary or advisable for the
administration of the plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No securities granted under the Restricted Securities Plans may
be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of prior to the consummation of an
&#147;initial public offering,&#148; as defined in the
Restricted Securities Plans and which would include this
offering. Unvested securities subject to awards may not be sold,
assigned, transferred, pledged, hypothecated or otherwise
disposed of and shall be subject to a risk of forfeiture until
such securities become vested. Moreover, to the extent required
by us, the participant may not transfer any securities acquired
pursuant to the Restricted Securities Plans for a period of
180&nbsp;days following the closing of an initial public
offering, or such longer or shorter period of time as may be
reasonably requested by an underwriter in connection with such
offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
FEBC-ALT Investors and BLC may amend or terminate their
respective Restricted Securities Plan at any time for any or no
reason; provided, however, that no amendment that requires the
approval of its equity holders under applicable Delaware law
will be effective unless the same shall be approved by the
requisite vote and, subject to adjustments in the event of
certain changes in its capitalization, BLC and FEBC-ALT
Investors may not adversely affect the rights of participants
with respect to awards previously granted under the Restricted
Securities Plans. Unless sooner terminated, the Restricted Stock
Plans will automatically terminate on the tenth anniversary of
their effective date.
</DIV>

<P align="center" style="font-size: 10pt;">116

</FONT>
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<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of the restricted stock agreements, employees of
Alterra and BLC received bonuses in connection with their
restricted securities awards, as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Participants under FEBC-ALT Investors Restricted Securities Plan
who made timely elections pursuant to section&nbsp;83(b) of the
Internal Revenue Code with respect to their awards received cash
bonuses sufficient, on an after tax basis, to cover
Alterra&#146;s withholding obligations with respect to up to
100% of the membership interests subject to these awards, and
the bonuses were used solely for purposes of paying these tax
obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Participants under BLC&#146;s Restricted Securities Plan who
made timely elections pursuant to section&nbsp;83(b) of the
Internal Revenue Code received cash bonuses sufficient, on an
after tax basis, to cover BLC&#146;s withholding obligations
with respect to their awards for those shares (a)&nbsp;with
respect to which the forfeiture restrictions will lapse upon
consummation of an initial public offering (which includes this
offering) and (b)&nbsp;for which the participants had made such
timely elections, and such bonuses were used solely for the
purposes of paying these tax obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, the following executives of Alterra received grants of the
following amounts of restricted FEBC-ALT Investors membership
interests:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark W. Ohlendorf
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1.67</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Kristin A. Ferge
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">0.63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, the following executives of BLC received grants of the
following number of shares of restricted BLC common stock:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark J. Schulte
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">221.1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">John P. Rijos
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">221.1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">R. Stanley Young
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">189.5</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deborah C. Paskin
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">94.7</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective as of the completion of the formation transactions
described in &#147;Business&nbsp;&#151; History,&#148; the
Restricted Securities Plans will be merged into the Omnibus
Stock Incentive Plan, which is described immediately below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Omnibus Stock Incentive Plan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the occurrence of this offering, we intend to adopt a
new equity incentive plan for our employees, the Brookdale
Senior Living Omnibus Stock Incentive Plan, or the Plan, and to
present the Plan to our stockholders for their approval. The
purposes of the Plan will be to strengthen the commitment of our
employees, motivate them to faithfully and diligently perform
their responsibilities and attract and retain competent and
dedicated persons who are essential to the success of our
business and whose efforts will result in our long-term growth
and profitability. To accomplish such purposes, the Plan
provides for the issuance of stock options, stock appreciation
rights, restricted shares, deferred shares, performance shares,
unrestricted shares and other stock-based awards. We expect that
the following will generally describe the terms of the plan once
adopted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be reserved for issuance under the
Plan, provided however, that commencing on the first day of our
fiscal year beginning in calendar year 2006, the number of
shares reserved and available for issuance will be increased by
an amount equal to the lesser of
(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
or (2)&nbsp;2% of the number of outstanding shares of our common
stock on the last day of the immediately preceding fiscal year.
When section&nbsp;162(m) of the Internal Revenue Code, or the
Code, becomes applicable, the maximum aggregate number of shares
that will be subject to stock options or stock appreciation
rights that may be granted to any individual during any fiscal
year will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
the maximum aggregate number of shares that will be subject to
awards of restricted stock, deferred shares, unrestricted shares
or other stock-based awards that may be granted to any
individual during any fiscal year will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<P align="center" style="font-size: 10pt;">117

</FONT>

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<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Plan will initially be administered by our board of
directors, although it may be administered by either our board
of directors or any committee of our board of directors
including a committee that complies with the applicable
requirements of section 162(m) of the Code, Section 16 of the
Exchange Act and any other applicable legal or stock exchange
listing requirements (the board or committee being sometimes
referred to as the &#147;plan administrator&#148;). The plan
administrator may interpret the Plan and may prescribe, amend
and rescind rules and make all other determinations necessary or
desirable for the administration of the Plan. The Plan permits
the plan administrator to select the directors, key employees,
and consultants who will receive awards, to determine the terms
and conditions of those awards, including but not limited to the
exercise price, the number of shares subject to awards, the term
of the awards and the vesting schedule applicable to awards, and
to amend the terms and conditions of outstanding awards,
including but not limited to reducing the exercise price of such
awards, extending the exercise period of such awards and
accelerating the vesting schedule of such awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may issue incentive stock options or non-qualified stock
options under the Plan. The incentive stock options granted
under the Plan are intended to qualify as &#147;incentive stock
options&#148; within the meaning of Section&nbsp;422 of the Code
and may only be granted to our employees or any employee of our
parent or any subsidiary of the Company. The option exercise
price of all stock options granted under the Plan will be
determined by the plan administrator, except that any incentive
stock option or any stock option intended to qualify as
performance-based compensation under section&nbsp;162(m) of the
Code will not be granted at a price that is less than 100% of
the fair market value of the stock on the date of grant.
Further, the exercise price of incentive stock options granted
to stockholders who own greater than 10% of the voting stock
will not be granted at a price less than 110% of the fair market
value of the stock on the date of grant. The term of all stock
options granted under the Plan will be determined by the plan
administrator, but may not exceed ten years (five years for
incentive stock options granted to stockholders who own greater
than 10% of the voting stock). No incentive stock option may be
granted to an optionee, which, when combined with all other
incentive stock options becoming exercisable in any calendar
year that are held by that optionee, would have an aggregate
fair market value in excess of $100,000. In the event an
optionee is awarded $100,000 in incentive stock options in any
calendar year, any incentive stock options in excess of $100,000
granted during the same year will be treated as nonqualified
stock options. Each stock option will be exercisable at such
time and pursuant to such terms and conditions as determined by
the plan administrator in the applicable stock option agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unless the applicable stock option agreement provides otherwise,
in the event of an optionee&#146;s termination of employment or
service for any reason other than cause, retirement, disability
or death, such optionee&#146;s stock options (to the extent
exercisable at the time of such termination) generally will
remain exercisable until 90&nbsp;days after such termination and
will expire thereafter. Unless the applicable stock option
agreement provides otherwise, in the event of an optionee&#146;s
termination of employment or service due to retirement,
disability or death, such optionee&#146;s stock options (to the
extent exercisable at the time of such termination) generally
will remain exercisable until one year after such termination
and will expire thereafter. Stock options that were not
exercisable on the date of termination will expire at the close
of business on the date of such termination. In the event of an
optionee&#146;s termination of employment or service for cause,
such optionee&#146;s outstanding stock options will expire at
the commencement of business on the date of such termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of a change in control (as defined below), unless
each outstanding stock option is assumed, continued or
substituted pursuant to the change in control transaction&#146;s
governing document, such stock options will become fully vested
and exercisable immediately prior to the effective date of such
change in control and will expire upon the effective date of
such change in control. If a change in control transaction
occurs that is a qualifying asset sale or that includes a
continuation, assumption or substitution of stock options, and
an optionee&#146;s employment with the Company or any acquiring
entity or affiliate thereof is terminated by the employer other
than for cause on or after the effective date of the change in
control but prior to the first anniversary of the
</DIV>

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<DIV align="left" style="font-size: 10pt;">
effective date of the change in control, then 50% of the
optionee&#146;s outstanding and unvested options will become
fully vested and exercisable as of the date of such termination.
The term change in control generally means (1)&nbsp;any person
or entity (other than (a)&nbsp;an affiliate of Fortress or any
managing director, general partner, director, limited partner of
any such affiliate of Fortress or (b)&nbsp;any investment fund
or other entity managed directly or indirectly by Fortress or
any general partner, limited partner, managing member or person
occupying a similar role of or with respect to any such fund or
entity) becomes the beneficial owner of securities of the
Company representing 50% of the Company&#146;s then outstanding
voting power; (2)&nbsp;the consummation of a merger of the
Company or any subsidiary of the Company with any other
corporation, other than a merger immediately following which the
board of directors of the Company immediately prior to the
merger constitute at least a majority of the board of directors
of the company surviving the merger or, if the surviving company
is a subsidiary, the ultimate parent thereof; or (3)&nbsp;the
Company&#146;s stockholders approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale of all or substantially
all of the Company&#146;s assets, other than (a)&nbsp;a sale of
such assets to an entity, at least 50% of the voting power of
which is held by Company stockholders following the transaction
in substantially the same proportions as their ownership of the
Company immediately prior to the transaction or (b)&nbsp;a sale
of such assets immediately following which the board of
directors of the Company immediately prior to such sale
constitute at least a majority of the board of directors of the
entity to which the assets are sold or, if that entity is a
subsidiary, the ultimate parent thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of a dissolution or liquidation of the Company, the
administrator may permit optionees to exercise stock options,
including stock options that would not otherwise be exercisable,
until ten days prior to such transaction. To the extent not
exercised, these stock options will terminate immediately prior
to the proposed transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock appreciation rights, or SARs, may be granted under the
Plan either alone or in conjunction with all or part of any
stock option granted under the Plan. A stand alone SAR granted
under the Plan entitles its holder to receive, at the time of
exercise, an amount per share equal to the excess of the fair
market value (at the date of exercise) of a share of common
stock over a specified price fixed by the plan administrator. An
SAR granted in conjunction with all or part of a stock option
under the Plan entitles its holder to receive, at the time of
exercise, an amount per share equal to the excess of the fair
market value (at the date of exercise) of a share of common
stock over the exercise price of the related stock option. In
the event of a participant&#146;s termination of employment or
service, stand alone SARs will be exercisable at such times and
subject to such terms and conditions determined by the plan
administrator on or after the date of grant, while SARs granted
in conjunction with all or part of a stock option will be
exercisable at such times and subject to terms and conditions as
set forth for the related stock option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restricted shares, deferred shares and performance shares may be
granted under the Plan. The plan administrator will determine
the purchase price, performance period and performance goals, if
any, with respect to the grant of restricted shares, deferred
shares and performance shares. Participants with restricted
shares and shares of preferred stock generally have all of the
rights of a stockholder. With respect to deferred shares, during
the restricted period, subject to the terms and conditions
imposed by the plan administrator, the deferred shares may be
credited with dividend equivalent rights. If the performance
goals and other restrictions are not attained, the participant
will forfeit his or her shares of restricted shares, deferred
shares and/or performance shares. Subject to the provisions of
the Plan and applicable award agreement, the plan administrator
has sole discretion to provide for the lapse of restrictions in
installments or the acceleration or waiver of restrictions (in
whole or part) under certain circumstances, including, but not
limited to, the attainment of certain performance goals, a
participant&#146;s termination of employment or service, a
participant&#146;s death or disability or the occurrence of a
change in control as defined in the applicable award agreement.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following the consummation of our offering, the Plan provides
that each of our non-employee directors (as defined in the Plan)
will automatically receive annual awards of our common stock
with an aggregate fair market value
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
valued as of the date of grant, on the first business day after
our annual meeting of stockholders, commencing in 2006, and each
annual meeting thereafter during which the Plan is in effect. In
addition, each member of our board that is an eligible director
immediately prior to the consummation of this offering will be
granted &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock under our Plan on each of the first day
following: (1)&nbsp;the consummation of this offering,
(2)&nbsp;the meeting of stockholders in 2006 at which directors
are to be elected, and (3)&nbsp;the meeting of stockholders in
2007 at which directors are to be elected, so long as such
eligible director continues to serve as one of our directors on
each grant date. An eligible director that receives any of the
grants described in the preceding sentence during any fiscal
year will not be eligible to receive the automatic stock grants
under the Plan for that fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend or other change in corporate
structure affecting the number of issued shares of common stock,
the plan administrator may make an equitable substitution or
proportionate adjustment in (1)&nbsp;the aggregate number of
shares reserved for issuance under the Plan, (2)&nbsp;the
maximum number of shares that may be granted to any participant
in any calendar year, and, (3)&nbsp;the kind, number and
exercise price subject to outstanding stock options and SARs
granted under the Plan, and (4)&nbsp;the kind, number and
purchase price of shares subject to outstanding awards of
restricted shares, deferred shares and performance shares
granted under the Plan, provided that no such adjustment will
cause any award under the Plan that is or becomes subject to
section&nbsp;409A of the Code to fail to comply with the
requirements of that section. In addition, the plan
administrator, in its discretion, may terminate all awards with
the payment of cash or in-kind consideration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The terms of the Plan provide that the board may amend, alter or
discontinue the Plan, but no such action may impair the rights
of any participant with respect to outstanding awards without
the participant&#146;s consent. Unless the board determines
otherwise, stockholder approval of any such action will be
obtained if required to comply with applicable law. The Plan
will terminate
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2015.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Effective as of the date of the completion of the series of
formation transactions described in &#147;Business&nbsp;&#151;
History,&#148; the Restricted Stock Plans described above were
merged into the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>401(k) Plans</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of Alterra and BLC maintains retirement plans qualified
under Section&nbsp;401 of the Internal Revenue Code, which plans
are substantially similar, and which cover all of their
respective employees. All employees, subject to certain
regulatory qualifications, who have completed the minimum one
year service requirement and who are at least 21 years of age,
with respect to the BLC 401(k) plan and 19 years of age, with
respect to the Alterra 401(k) plan are eligible to participate
in the 401(k) plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the 401(k) plans, employees may elect to defer up to
22% of their salary under the Alterra 401(k) plan and up to 90%
of their compensation under the BLC plan (not to exceed the
statutorily prescribed annual limits) and have the deferrals
contributed to the respective 401(k) plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra and BLC have made discretionary contributions to the
401(k) plans in amounts determined annually by their boards of
directors. Under the 401(k) plans, an employee&#146;s benefits
from matching contributions are: (a)&nbsp;20% vested after one
year of service, (b)&nbsp;40% vested after two years of service,
(c)&nbsp;60% vested after three years of service, (d)&nbsp;80%
vested after four years of service and (e)&nbsp;100% vested
after five years of service. The 401(k) plans may be amended or
terminated at any time; however, upon termination of the plan
all amounts credited to an employee&#146;s account become 100%
vested.
</DIV>

<P align="center" style="font-size: 10pt;">120

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<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As soon as administratively feasible after the combination,
these two 401(k) plans will be merged.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employment Contracts, Termination of Employment and
Change-in-Control Arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Prior Employment Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra entered into an employment agreement with Mark W.
Ohlendorf, dated May&nbsp;16, 2003, or the Prior Employment
Agreement, which has been superseded by his current employment
agreement, which is described in &#147;&#151;&nbsp;Current
Employment Agreements&#148; below. The Prior Employment
Agreement extended until December&nbsp;31, 2005, following which
the agreement would automatically extend on an annual basis for
one additional year, unless notice not to renew was given
90&nbsp;days prior to the expiration of its term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Prior Employment Agreement, Mr.&nbsp;Ohlendorf served
as President and Chief Financial Officer of Alterra, and
received an initial annual base salary of $350,000, with annual
increases commencing with the 2004 calendar year of at least
$10,000. The Prior Employment Agreement provided for an initial
incentive bonus of $220,000, with subsequent annual incentive
bonuses up to 50% of Mr.&nbsp;Ohlendorf&#146;s base salary, and
Mr.&nbsp;Ohlendorf would not be entitled to any other bonuses
other than the bonuses described above. The Prior Employment
Agreement also provided that Mr.&nbsp;Ohlendorf would be
eligible to participate in all employee benefit plans maintained
by Alterra for senior executives during the term of the
agreement, and Alterra would contribute for his benefit, $25,000
in the aggregate, to pension, profit sharing, retirement or
other deferred compensation plans or programs in which he
participates. Under the Prior Employment Agreement,
Mr.&nbsp;Ohlendorf was also entitled to a monthly automobile
allowance of $600.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Prior Employment Agreement provided that Mr.&nbsp;Ohlendorf
would receive severance payments and benefits in the event of
termination of his employment by Alterra other than for
&#147;cause&#148; (as defined in the agreement) or by the
executive with &#147;good reason&#148; (as defined in the
agreement), or by reason of disability. These severance payments
include, for 12&nbsp;months following the date of termination of
employment, continuation of annual base salary and continuation,
at Alterra&#146;s expense, of group health plan benefits, life
insurance, long-term disability benefits, and other employee
benefit plans or programs, to the extent permissible under the
terms of such plans or law. The severance payments and benefits
otherwise due if Mr.&nbsp;Ohlendorf&#146;s employment is
terminated by Alterra other than for cause or by him for good
reason, would not have been paid if Mr.&nbsp;Ohlendorf had
breached certain covenants in the Prior Employment Agreement,
including noncompetition and confidentiality restrictions and
the requirement to return company property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Current Employment Agreements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of Alterra and BLC (each, an employer) have, along with the
Company, entered into employment agreements with several of
their respective employees
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
or the Employment Agreements. Other than the positions and
salary and bonuses, these Employment Agreements are
substantially the same, except as noted below. Alterra and the
Company have entered into an employment agreement with Mark W.
Ohlendorf and Kristin A. Ferge. Mr.&nbsp;Ohlendorf&#146;s
agreement supersedes the Prior Employment Agreement. BLC and the
Company have entered into employment agreements with each of
Mark J. Schulte, John P. Rijos, R. Stanley Young and Deborah C.
Paskin. Upon the completion of the series of formation
transactions described in &#147;Business&nbsp;&#151;
History,&#148; the Company will be the employer of each of these
executives.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The executives&#146; positions, annual base salaries and target
bonuses for the first fiscal year following the effective date
of the employment agreements are set forth below:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Annual Base</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Target</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT face="helvetica,arial">Name/ Title</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Salary</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Bonus</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark J. Schulte&nbsp;&#151; Chief
    Executive Officer
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">200,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">200,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark W. Ohlendorf&nbsp;&#151;
    Co-President
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">200,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">300,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">John P. Rijos&nbsp;&#151;
    Co-President
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">200,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">200,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">R. Stanley Young&nbsp;&#151;
    Executive Vice President and Chief Financial Officer
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">175,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">150,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Kristin A. Ferge&nbsp;&#151;
    Executive Vice President and Treasurer
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">175,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">150,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deborah C. Paskin&nbsp;&#151;
    Executive Vice President, Secretary and General Counsel
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">150,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the Employment Agreements, the executives&#146; bonuses
for the first fiscal year commencing after the effective date of
the Employment Agreements will be paid 50% in cash and 50% in
restricted shares of Company common stock pursuant to the
Company&#146;s Omnibus Stock Incentive Plan described in
&#147;&#151;&nbsp;Omnibus Stock Incentive Plan&#148; above.
After the first fiscal year of the Company following the
effective date of the Employment Agreements, the
executives&#146; respective bonuses will be based on achievement
of certain performance standards as determined by the board of
directors in its discretion, and may be payable in a combination
of cash and shares of common stock in the board of
directors&#146; discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Employment Agreements have three year initial terms at the
end of which the agreements automatically extend on an annual
basis for up to two additional one year terms, unless notice not
to renew an agreement is given 90&nbsp;days prior to the
expiration of its term. The Employment Agreements provide that
the executives will be entitled to all the usual benefits
offered to employees at the executives&#146; levels including,
vacation, sick time, participation in the employer&#146;s 401(k)
retirement plan and medical, dental and insurance programs, all
in accordance with the terms of such plans and programs in
effect from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Employment Agreements provide that, in the event of
termination of employment by the employer other than a
termination for &#147;cause&#148; (as defined in the agreement),
or by the executives with &#147;good reason&#148; (as defined in
the agreement), and the termination is not within 12&nbsp;months
following a &#147;change of control&#148; (as defined in the
Employment Agreements), the executives will receive severance
payments and benefits, upon signing a release of claims in a
form adopted by the employer, or the Release, provided the
executives comply with any restrictive covenants by which the
executives are bound. These severance payments and benefits are
composed of continuation of annual base salary for six months
following the date of termination of employment and
continuation, at the employer&#146;s expense, of coverage under
the employer&#146;s medical plan until the earlier of six months
following the date of termination of employment or the period of
time until the executive becomes eligible under the medical
benefits program of a new employer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of a change of control, and the executives&#146;
employment is terminated within 12&nbsp;months following the
change in control either by the employer (or a successor)
without cause, or by the executives for good reason, then,
provided the executives sign the Release and comply with any
restrictive covenants by which the executives are bound, the
executives will be entitled to, for 12&nbsp;months following the
date of termination of employment, continuation of annual base
salary (at the rate in effect at the time of termination, or if
higher, immediately prior to the change of control) and
continuation of coverage under the employer&#146;s medical plan.
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='113'></A>
</DIV>

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Agreements With Stockholders</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>General</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the series of formation transactions
described in &#147;Business&nbsp;&#151; History,&#148; we
entered into various agreements with respect to our governance
and our common stock. The following is a summary of material
provisions of these agreements. This summary does not purport to
be complete and is qualified in its entirety by reference to the
respective agreements, a copy of each of which is filed as
exhibits hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Stockholders Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
we entered into a Stockholders Agreement with FBA, Fortress
Investment Trust&nbsp;II and Health Partners (the
&#147;Stockholders Agreement&#148;). The Stockholders Agreement
provides these stockholders with certain rights with respect to
the designation of directors to our board of directors as well
as registration rights for our securities owned by them.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Designation of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Stockholders Agreement requires that each of FBA, Fortress
Investment Trust&nbsp;II and their respective affiliates and
permitted transferees (collectively referred to in this
prospectus as the &#147;Fortress Stockholders&#148;) and Health
Partners and its affiliates and permitted transferees
(collectively referred to in this prospectus as the &#147;HP
Stockholders&#148;) vote or cause to be voted all of our voting
stock beneficially owned by each and to take all other
reasonably necessary action so as to elect to our board of
directors the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    so long as the Fortress Stockholders beneficially own
    (i)&nbsp;more than 50% of the voting power of the Company, four
    directors designated by FIG Advisors LLC, an affiliate of
    Fortress, or such other party designated by Fortress
    (&#147;FIG&#148;); (ii)&nbsp;between 25% and 50% of the voting
    power of the Company, three directors designated by FIG;
    (iii)&nbsp;between 10% and 25% of the voting power of the
    Company, two directors designated by FIG; and (iv)&nbsp;between
    5% and 10% of the voting power of the Company, one director
    designated by FIG;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    so long as the HP Stockholders beneficially own more than 5% of
    the voting power of the Company, one director designated by
    Health Partners.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If at any time the number of our directors entitled to be
designated by FIG or HP pursuant to the Stockholder Agreement
shall decrease, within 10&nbsp;days thereafter, FIG or HP, as
applicable, shall cause the appropriate number of directors to
resign and any such vacancy shall be filled by a majority vote
of our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with the Stockholders Agreement, FIG has
designated Wesley R. Edens and William Doniger and Health
Partners has
designated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to
our board of directors.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Registration Rights</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Demand Rights.</I></B> We have granted to the Fortress
Stockholders and the HP Stockholders, in each case for so long
as such stockholders collectively and beneficially own an amount
of our common stock at least equal to 5% or more of our common
stock issued and outstanding immediately after the consummation
of this offering, a &#147;Registrable Amount,&#148;
&#147;demand&#148; registration rights that allow them at any
time
after &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
to request that we register under the Securities Act of 1933, as
amended, an amount equal to or greater than 5% of our stock that
they own. Each of the Fortress Stockholders and the HP
Stockholders is entitled to an aggregate of two demand
registrations. We are not required to maintain the effectiveness
of the registration statement for more than 60&nbsp;days. We are
also not required to effect any demand registration within six
months of a &#147;firm
</DIV>

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<DIV align="left" style="font-size: 10pt;">
commitment&#148; underwritten offering to which the requestor
held &#147;piggyback&#148; rights and which included at least
50% of the securities requested by the requestor to be included.
We are not obligated to grant a request for a demand
registration within six months of any other demand registration,
and may refuse a request for demand registration if in our
reasonable judgment, it is not feasible for us to proceed with
the registration because of the unavailability of audited
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Piggyback Rights.</I></B> For so long as they beneficially
own an amount of our common stock at least equal to 1% of our
common stock issued and outstanding immediately after the
consummation of this offering, the Fortress Stockholders and the
HP Stockholders also have &#147;piggyback&#148; registration
rights that allow them to include the shares of common stock
that they own in any public offering of equity securities
initiated by us (other than those public offerings pursuant to
registration statements on Forms&nbsp;S-4 or S-8) or by any of
our other stockholders that have registration rights. The
&#147;piggyback&#148; registration rights of these stockholders
are subject to proportional cutbacks based on the manner of the
offering and the identity of the party initiating such offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Shelf Registration.</I></B> We have granted each of the
Fortress Stockholders and the HP Stockholders, for so long as
each beneficially owns a Registrable Amount, the right to
request a shelf registration on Form&nbsp;S-3, providing for an
offering to be made on a continuous basis, subject to a time
limit on our efforts to keep the shelf registration statement
continuously effective and our right to suspend the use of the
shelf registration prospectus for a reasonable period of time
(not exceeding 60&nbsp;days in succession or 90&nbsp;days in the
aggregate in any 12&nbsp;month period) if we determine that
certain disclosures required by the shelf registration statement
would be detrimental to us or our stockholders. In addition,
each of the Fortress Stockholders and HP Stockholders which have
not made a request for a shelf registration may elect to
participate in such shelf registration within ten days after
notice of the registration is given.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Indemnification; Expenses.</I></B> We have agreed to
indemnify each of the Fortress Stockholders and the HP
Stockholder against any losses or damages resulting from any
untrue statement or omission of material fact in any
registration statement or prospectus pursuant to which they sell
shares of our common stock, unless such liability arose from
such stockholder&#146;s misstatement or omission, and each such
stockholder has agreed to indemnify us against all losses caused
by its misstatements or omissions. We will pay all expenses
incident to our performance under the Stockholders Agreement,
and the Fortress Stockholders and HP Stockholders will pay their
respective portions of all underwriting discounts, commissions
and transfer taxes relating to the sale of their shares under
the Stockholders Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Registration Rights Agreement With Emeritus and NW
Select</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event Emeritus and NW Select are unable to sell all of
our shares of common stock offered by them in this offering, we
have agreed to enter into a registration rights agreement (the
&#147;Registration Rights Agreement&#148;) with Emeritus and NW
Select immediately after the consummation of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Demand Rights. </I></B>Pursuant to the Registration Rights
Agreement, Emeritus, NW Select and their respective affiliates
and permitted transferees (collectively, the &#147;ENW
Stockholders&#148;), for so long as they beneficially own a
Registrable Amount, will have one &#147;demand&#148;
registration right that allows the ENW Stockholders, at any
time, to request that we register under the Securities Act an
amount equal to or greater than 5% of our stock owned by the ENW
Stockholders. The ENW Stockholders are collectively entitled to
one demand registration. We are not required to maintain the
effectiveness of the registration statement for more than
60&nbsp;days. We are also not required to effect any demand
registration within six months of a &#147;firm commitment&#148;
underwritten offering to which the requestor held
&#147;piggyback&#148; rights and which included at least 50% of
the securities requested by the requestor to be included. We are
not obligated to grant a request for a demand registration
within six months of any other demand registration, and may
refuse a request for demand registration if in our
</DIV>

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<DIV align="left" style="font-size: 10pt;">
reasonable judgment, it is not feasible for us to proceed with
the registration because of the unavailability of audited
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Piggyback Rights. </I></B>For so long as they beneficially
own a Registrable Amount, the ENW Stockholders also have
&#147;piggyback&#148; registration rights that allow them to
include the shares of common stock that they own in any public
offering of equity securities initiated by us (other than those
public offerings pursuant to registration statements on
Forms&nbsp;S-4 or S-8) or by any of our other stockholders that
have registration rights. The &#147;piggyback&#148; registration
rights of these stockholders are subject to proportional
cutbacks based on the manner of the offering and the identity of
the party initiating such offering. In the event that the ENW
Stockholders are unable to sell all of our shares of common
stock offered by them in this offering due to underwriter
cutbacks, then the ENW Stockholders shall be entitled to one
additional piggyback registration right even if they cease to
own a Registrable Amount after the consummation of this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Indemnification; Expenses. </I></B>We have agreed to
indemnify each of the ENW Stockholders against any losses or
damages resulting from any untrue statement or omission of
material fact in any registration statement or prospectus
pursuant to which they sell shares of our common stock, unless
such liability arose from such stockholder&#146;s misstatement
or omission, and each such stockholder has agreed to indemnify
us against all losses caused by its misstatements or omissions.
We will pay all expenses incident to our performance under the
Registration Rights Agreement, and the ENW Stockholders will pay
their respective portions of all underwriting discounts,
commissions and transfer taxes relating to the sale of their
shares under the Registration Rights Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Governance Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, Fortress Brookdale Investment Fund&nbsp;LLC, Fortress
Investment Trust&nbsp;II, Fortress Registered Investment Trust
and Health Partners entered into a governance agreement (the
&#147;Governance Agreement&#148;). Each of Fortress Brookdale
Investment Fund&nbsp;LLC, Fortress Investment Trust&nbsp;II and
Fortress Registered Investment Trust is an affiliate of
Fortress, our largest stockholder. Pursuant to the Governance
Agreement, each of Fortress Brookdale Investment Fund&nbsp;LLC,
Fortress Investment Trust&nbsp;II, Fortress Registered
Investment Trust and their respective affiliates and permitted
transferees (collectively, the &#147;Fortress
Fund&nbsp;Stockholders&#148;) and the HP Stockholders shall vote
or cause to be voted all of our voting stock beneficially owned
by each and take all other reasonably necessary action so as to
elect to our board of directors one director designated by the
HP Stockholders. The Governance Agreement shall terminate
automatically upon the consummation of this offering and be of
no further force or effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, during the term of the Governance Agreement,
certain actions taken by us, including with respect to any
increase in our capital stock and the acquisition or disposition
of any asset, require the approval of the director designated by
the HP Stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Stockholders Agreement with Emeritus and NW Select</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;29, 2005, we entered into a Stockholders and Voting
Agreement with FIT-ALT Investor, Emeritus and NW Select (the
&#147;ENW Stockholders Agreement&#148;). Among other things, the
ENW Stockholders Agreement requires the ENW Stockholders to vote
all of our shares of common stock beneficially owned by them as
directed by FIT-ALT Investor LLC or its transferees. In
addition, the ENW Stockholders may not transfer the shares of
our common stock that they beneficially own other than to their
permitted transferees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ENW Stockholders Agreement shall terminate automatically
upon the consummation of this offering and be of no further
force or effect.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Conveyance Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
we entered into a conveyance agreement with certain equity
holders of BLC, FEBC-ALT Investors (Alterra&#146;s indirect
parent company) and Fortress CCRC, including several affiliates
of Fortress. Pursuant to this conveyance agreement, three
separate wholly-owned subsidiaries of ours were merged with and
into BLC, FEBC-ALT Investors and Fortress CCRC, respectively,
and the equity holders of these entities received an aggregate
of 58,000,000&nbsp;shares of our common stock and became direct
owners of 100% of our common stock prior to this offering.
Pursuant to the conveyance agreement, we have agreed to
indemnify each of such former equity holders of BLC, FEBC-ALT
Investors and Fortress CCRC from any damages suffered by such
equity holders as a result of breaches of representations and
warranties made by us in the conveyance agreement. See
&#147;Business&nbsp;&#151; History&#148; for a further
description of these transactions and &#147;Principal and
Selling Stockholders&#148; for a list of the equity holders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Acquisition of Membership Interests of FEBC-ALT Investors by
FIT-ALT Investor LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2005, we entered into a Membership Interest Purchase
Agreement with FIT-ALT Investor LLC, Emeritus and NW Select.
Pursuant to this agreement, FIT-ALT Investor purchased from
Emeritus and NW Select membership interests in FEBC-ALT
Investors representing approximately 25% of the membership
interests in FEBC-ALT Investors for an aggregate purchase price
of $50.0&nbsp;million. In connection with this transaction,
FEBC-ALT Investors paid a preferred distribution of
$20.0&nbsp;million to FIT-ALT Investor LLC in connection with
its membership interest in FEBC-ALT Investors. FIT-ALT Investor
used the proceeds of the distribution to pay a portion of the
purchase price. In addition, pursuant to this agreement, each of
Emeritus and NW Select agreed to sell in this offering all of
the shares of our common stock received by them
in &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005
in exchange for their membership interests in FEBC-ALT
Investors. Also, we agreed to indemnify each of Emeritus and NW
Select against various liabilities in connection with this
offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In August 2005, FIT-ALT Investor, Emeritus and NW Select entered
into an amendment of the limited liability company agreement of
FEBC-ALT Investors. Pursuant to this amendment, FIT-ALT Investor
exchanged a preferred distribution of approximately $7.1 million
from FEBC-ALT Investors to which FIT-ALT Investor was entitled
to under FEBC-ALT Investors&#146; limited liability company
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Provident</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Darryl W. Copeland,&nbsp;Jr., previously the chief executive
officer, president and chairman of the board of trustees of
Provident, was, until April 2004, a member of the boards of
directors of both BLC and Alterra. Mr.&nbsp;Copeland also was a
managing director of Fortress Capital Finance, an affiliate of
Fortress, from August 2001 until April 2004. Provident is party
to the sale-leaseback arrangements described in
&#147;Business&nbsp;&#151; Leases&nbsp;&#151; Provident
Sale-Leasebacks.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Chambrel</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2001, BLC entered into an agreement to purchase
seven facilities from AIMCO consisting of 1,477&nbsp;units, or
the Chambrel Portfolio, for which it made earnest money deposits
in the aggregate amount of $4.0&nbsp;million. The deposits were
funded with the proceeds of advances made to BLC by Capstead
Mortgage Corporation, or Capstead, a publicly traded company in
which an affiliate of Fortress held an interest at the time.
Fortress no longer has any interest in Capstead. In connection
with the closing, BLC assigned its rights under the purchase and
sale agreements to subsidiaries of Capstead and entered into
seven operating leases with subsidiaries of Capstead. On
October&nbsp;31, 2002, Capstead sold the Chambrel at Windsong
Care Center in Akron, Ohio, an 83-bed skilled nursing center,
and terminated the related operating lease. The net cost of the
remaining six facilities, consisting of 1,394&nbsp;units, was
approximately $148.7&nbsp;million (including the assumption of
approximately $120.6&nbsp;million of debt).
</DIV>

<P align="center" style="font-size: 10pt;">126

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Battery Park City</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September 2001, BLC&#146;s The Hallmark at Battery Park
City facility was encumbered by a $49.1&nbsp;million first
mortgage loan and certain hedging contracts, all of which were
guaranteed by BLC. Subsequent to the terrorist attacks of
September&nbsp;11, 2001, the lenders declared the loan and
hedging contracts to be in default and, on March&nbsp;19, 2002,
notified BLC of an acceleration of the first mortgage loan and
demand for performance pursuant to the guaranty. In September
2002, FRIT BPC Acquisition LLC, or FRIT BPC, an affiliate of
Fortress, purchased the loan with a balance of
$50.2&nbsp;million, including principal, accrued interest,
default interest and late charges. On October&nbsp;28, 2002, the
loan was modified to provide for: (i)&nbsp;the payment of
interest at LIBOR plus 2.70%, payable to the extent of cash flow
through September&nbsp;30, 2003 and monthly thereafter;
(ii)&nbsp;quarterly payments of principal to the extent of cash
flow (as defined); and (iii)&nbsp;a scheduled maturity date of
December&nbsp;31, 2004, with an option for BLC to extend the
maturity date to December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The facility was also encumbered by a mezzanine loan in the
maximum principal amount of $8.5&nbsp;million, with a balance of
$9.8&nbsp;million including accrued interest, which was
purchased by FRIT BPC in December 2002. On January&nbsp;30,
2003, the mezzanine loan was amended to extend the scheduled
maturity date of December&nbsp;31, 2004, with an option for BLC,
to extend the maturity date to December&nbsp;31, 2005. In
connection with the purchase, BLC granted the seller of the
mezzanine loan a 25% equity interest in the facility pursuant to
an equity participation agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2004, BLC paid the seller of the mezzanine loan
$100,000 to terminate the equity participation agreement. FRIT
BPC reimbursed BLC for this payment. On March&nbsp;30, 2005, BLC
completed a refinancing of five facilities, including The
Hallmark, Battery Park City, and repaid the FRIT BPC first
mortgage and mezzanine loans. See &#147;Description of
Indebtedness&nbsp;&#151; Guaranty Bank Mortgage Loan.&#148; We
intend to use a portion of the net proceeds of this offering to
repay a portion of the Guaranty Bank Mortgage Loan. See
&#147;Use of Proceeds.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Grand Court</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2001, BLC acquired a 45% interest in GFB-AS
Investors, LLC, or GFB, for approximately $5.7&nbsp;million.
GFB, in turn, acquired the equity interests in the general
partners of various limited partnerships, or GC LPs, each of
which owned one senior living facility, and each of which were
previously owned or controlled by affiliates of Grand Court
Lifestyles, Inc., together with management contract rights and
certain loans receivable. A wholly-owned subsidiary of BLC
entered into management consulting agreements with each of the
GC LPs. The total initial investment in GFB was approximately
$12.8&nbsp;million, of which BLC&#146;s share was approximately
$5.7&nbsp;million and was funded from the proceeds of a loan
made by an affiliate of Fortress. In September 2002, the members
of GFB contributed approximately $2.6&nbsp;million to fund
additional purchases of limited partnership interests in certain
GC LPs and to provide loans to various partnerships, of which
BLC&#146;s share was approximately $1.2&nbsp;million. BLC&#146;s
share was funded by a loan from an affiliate of Fortress. In May
2003, BLC purchased the remaining 55% interest in GFB for net
cash consideration of approximately $10.5&nbsp;million,
including closing costs, which was funded by a loan from the
stockholders of FBA. During the first quarter of 2004, 14 of the
limited partnerships sold the facilities that they owned to
Ventas and, in connection with such sales, certain subsidiaries
of BLC entered into and became the tenants under a master lease
with Ventas. For a more detailed description of the Ventas
transaction, see
&#147;Business&nbsp;&#151;&nbsp;Leases&nbsp;&#151;&nbsp;Ventas
Lease Arrangement with BLC.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SNH</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;28, 2003, AHC Trailside, Inc., a subsidiary of
Alterra, entered into and became the tenant under a lease, or
the SNH Lease, with SNH ALT Leased Properties Trust, or SNH, for
25 assisted living properties. Simultaneously with the entering
into of the SNH Lease, SNH ALT Mortgaged Property Trust, an
affiliate of SNH, made a $6.9&nbsp;million loan, or the SNH
Loan, to Pomacy Corporation, a wholly owned subsidiary of
Alterra. At such time, the SNH Lease and SNH
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Loan were subject to cross-defaults, cross-guarantee and
cross-collateralization. In December 2003, in connection with
Alterra&#146;s reorganization, FIT-ALT SNH Loan LLC, a
subsidiary of Fortress, purchased the SNH Loan from SNH ALT
Mortgaged Property Trust for an amount equal to the outstanding
principal balance of the SNH Loan plus accrued interest, the SNH
Lease and SNH Loan were amended to eliminate the cross-defaults,
cross-guarantees and cross-collateralization between the SNH
Loan documents and the SNH Lease documents, and Alterra paid SNH
$1.0&nbsp;million as consideration for the agreement to sell the
SNH Loan. Pomacy repaid the SNH Loan in full during 2004 with
the proceeds of sale of all but one of the properties mortgaged
to secure such loan and obtained a release of the mortgage on
the remaining property for a final payment of $1.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The NBA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The NBA is a 501(c)(3) not-for-profit organization founded in
1887. As a result of deteriorating operating performance and
unsuccessful negotiations to restructure the NBA&#146;s debt and
management, bonds issued by the NBA were trading at a discount
to their par value. In January and February 2004, FIT CCRC LLC,
an affiliate of Fortress, acquired $44.7&nbsp;million aggregate
amount of the NBA bonds. Fortress helped form the unsecured
creditors&#146; committee to lead a restructuring of the NBA. In
February 2004, the NBA elected to file for bankruptcy
protection. In September 2004, Fortress CCRC negotiated an asset
purchase agreement to acquire the Fortress CCRC Portfolio from
the NBA, and was subsequently selected as the winning bidder
through a bankruptcy auction in December 2004. The acquisition
closed in April and May 2005. Proceeds from the sale of these
facilities and cash from the NBA were used to fund a plan of
reorganization, which included repayment in full of the bonds
owned by FIT CCRC LLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Loan to Mark J. Schulte</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2000, BLC loaned approximately $2.0&nbsp;million to
our chief executive officer, Mark J. Schulte. In exchange, BLC
received a ten-year, secured, non-recourse promissory note from
Mr.&nbsp;Schulte, which bears interest at a rate of
6.09%&nbsp;per annum, 2.0% of which is payable in cash the
remainder of which accrues and will be paid at maturity on
October&nbsp;2, 2010. The greatest outstanding amount of
indebtedness due on the note within our last fiscal year was
approximately $2.4&nbsp;million, and the amount outstanding as
of March&nbsp;31, 2005 was approximately $2.4&nbsp;million. The
note is secured by Mr.&nbsp;Schulte&#146;s membership interests
in FBA, an affiliate of Fortress and the former holder of a
majority of the outstanding common stock of BLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Formation Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2005,
we entered into a series of merger transactions with our large
stockholders. See &#147;Business&nbsp;&#151; History&#148; for a
detailed explanation of these transactions.
</DIV>

<P align="center" style="font-size: 10pt;">128

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<DIV align="left" style="font-size: 10pt;">
<A name='114'></A>
</DIV>

<!-- link1 "PRINCIPAL AND SELLING STOCKHOLDERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRINCIPAL AND SELLING STOCKHOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, substantially all of the ownership
interests in the Company were beneficially owned by affiliates
of Fortress, Health Partners, Emeritus, NW Select and certain
members of our management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the total number of shares of our
common stock beneficially owned, and the percent so owned, as
adjusted to reflect the sale of the shares offered hereby, by
(i)&nbsp;each person known by us to be the beneficial owner of
more 5% of our common stock, (ii)&nbsp;each of our directors and
named executive officers (iii)&nbsp;all directors and executive
officers as a group, and (iv)&nbsp;the selling stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Beneficial ownership is determined in accordance with SEC rules
and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options or
warrants currently exercisable, or exercisable within
60&nbsp;days of the date hereof, are deemed outstanding for
computing the percentage of the person holding such options or
warrants but are not deemed outstanding for computing the
percentage of any other person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The percentage of beneficial ownership of our common stock
before this offering is based on 58,000,000 issued shares of our
common stock outstanding as
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005. The percentage of beneficial ownership of our common stock
after this offering is based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding. The table assumes that the
underwriters will not exercise their over allotment option to
purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock. If the underwriters exercise their option,
some of the selling stockholders, as indicated in the table,
will sell the additional shares necessary to satisfy the option
exercise ratably in proportion to the number of shares offered
by the selling stockholders before the option exercise.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Shares</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Beneficially</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Shares</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Owned Before</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Beneficially</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Offering</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Owned After</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Offering</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Number</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Shares</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">of</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Being</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Number</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Name of Beneficial Owner</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Shares(2)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Percent(3)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Offered</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">of Shares</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Percent</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Executive Officers and
    Directors(1)</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Wesley R. Edens(4)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,157,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">74.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,157,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark J. Schulte
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">690,829</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">691,518</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mark W. Ohlendorf
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">300,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">300,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">John P. Rijos
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">442,106</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">442,106</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">R. Stanley Young
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">378,939</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">378,939</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deborah C. Paskin
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">189,479</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">189,479</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Kristin A. Ferge
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">112,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">112,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Randal A. Nardone(4)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,157,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">74.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,157,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">William B. Doniger
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">All directors and executive
    officers as a group (9 persons)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">45,270,853</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">78.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">45,299,062</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">5% Stockholders</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Fortress Investment Holdings
    LLC(4)(5)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,157,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">74.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,157,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Health Partners(5)(6)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,844,625</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,866,368</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Selling Stockholders</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Emeritus Corporation(7)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,086,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,086,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">NW Select LLC(7)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,086,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,086,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">129

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;">&nbsp;
*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less than 1%
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The address of each officer or director listed in the table
    below, except Mark W. Ohlendorf and Kristin A. Ferge, is:
    c/o&nbsp;Brookdale Senior Living Inc., 330 North Wabash,
    Suite&nbsp;1400, Chicago, Illinois 60611. The address of Mark W.
    Ohlendorf and Kristin A. Ferge is c/o&nbsp;Brookdale Senior
    Living Inc., 6737&nbsp;W.&nbsp;Washington St., Suite&nbsp;2300,
    Milwaukee, Wisconsin 53214.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Consists of shares held, including restricted shares, shares
    underlying stock options exercisable within 60&nbsp;days and
    shares underlying warrants exercisable within 60&nbsp;days.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Assumes the exercise by such persons of all options and warrants
    exercisable within 60&nbsp;days to acquire shares of common
    stock and no exercise of options or warrants by any other person.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Includes 13,228,000&nbsp;shares held by FIT-ALT Investor LLC,
    20,000,000&nbsp;shares held by Fortress Investment Trust&nbsp;II
    and 9,929,000&nbsp;shares held by Fortress Brookdale Acquisition
    LLC. FIT-ALT Investor LLC is a wholly-owned subsidiary of
    Fortress Investment Trust&nbsp;II, which is a wholly-owned
    subsidiary of Fortress Investment Fund&nbsp;II LLC. Fortress
    Investment Fund&nbsp;II LLC is managed by its managing member,
    Fortress Fund&nbsp;MM&nbsp;II LLC, which is managed by Fortress
    Investment Group LLC pursuant to a management agreement.
    Fortress Brookdale Acquisition LLC is majority owned by Fortress
    Registered Investment Trust, which is 100% owned by Fortress
    Investment Fund LLC. Fortress Investment Fund LLC is managed by
    its managing member, Fortress Fund&nbsp;MM LLC, which is managed
    by Fortress Investment Group LLC pursuant to a management
    agreement. Fortress Investment Group LLC is 100% owned by
    Fortress Investment Holdings LLC. Fortress Investment Holdings
    LLC is an entity that is owned by certain individuals, including
    Wesley R. Edens, our Chairman of the board, and Randal A.
    Nardone, a member of our board. By virtue of their ownership
    interests in Fortress Investment Holdings LLC, Mr. Edens and Mr.
    Nardone may be deemed to beneficially own the shares listed as
    beneficially owned by Fortress Investment Holdings LLC.
    Mr.&nbsp;Edens and Mr.&nbsp;Nardone disclaim beneficial
    ownership of such shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    The address of Fortress Investment Holdings LLC is 1251 Avenue
    of the Americas, 16th Floor, New York, New York 10020. The
    address of Health Partners is c/o Capital&nbsp;Z Management,
    LLC, 54&nbsp;Thompson Street, New York, New York 10012.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    who is one of our directors, is a shareholder of Capital&nbsp;Z
    Partners, Ltd., the ultimate general partner of Capital&nbsp;Z
    Financial Services Fund&nbsp;II, L.P.
    Mr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;owns &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
    of the voting capital stock of Capital&nbsp;Z Partners, Ltd.
    Mr.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;disclaims
    beneficial ownership of all shares of our common stock that are
    beneficially owned by Capital&nbsp;Z.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    The address of Emeritus Corporation is 3131 Elliot Avenue,
    Suite&nbsp;500, Seattle, Washington 98121. The address of NW
    Select LLC is 600 University Street, Suite&nbsp;2500, Seattle,
    Washington 98101.</TD>
</TR>

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<A name='115'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DESCRIPTION OF INDEBTEDNESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The GECC Mortgage Loan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>General.</I></B> Subsidiaries of Fortress CCRC are
borrowers under a mortgage loan made on April&nbsp;5, 2005 by
General Electric Capital Corporation, or GECC, and Merrill Lynch
Capital, which we refer to as the GECC mortgage loan, with a
current balance of $105.8&nbsp;million. If certain financial
covenants in the GECC mortgage loan are satisfied, the borrowers
have the option to borrow up to an additional $30.0&nbsp;million
as a one-time advance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Security for the Mortgage Loan.</I></B> The GECC mortgage
loan is secured by (i)&nbsp;mortgage liens on the
borrowers&#146; fee interests in seven facilities, including the
one currently under contract for sale, comprising the Fortress
CCRC Portfolio, (ii)&nbsp;a security interest in substantially
all of the borrowers&#146; personal property and fixtures,
(iii)&nbsp;a pledge of the membership interests (or equivalent
equity interests) of each of the borrowers, (iv)&nbsp;a guaranty
for typical non-recourse carveouts by us, and (v)&nbsp;a
$10.0&nbsp;million limited guaranty by us for certain capital
improvements to be completed at the facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Interest Rate.</I></B> The GECC mortgage loan has an
interest rate equal to the 30-day LIBOR plus a margin of
3.0%&nbsp;per annum (which margin is reduced to 2.75%&nbsp;per
annum if certain financial covenants are satisfied).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Interest Rate Swap.</I></B> In connection with the GECC
mortgage loan we entered into an interest rate swap with Merrill
Lynch Capital Services to hedge our interest rate risk and
convert the loan from a floating rate to a fixed rate through
January&nbsp;22, 2008. The notional amount of the interest rate
swap is $108.0&nbsp;million of which $2.2 will be redesignated
and we pay a fixed rate of 3.615% and receive one-month LIBOR.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to closing the financing we entered into an additional
$12.0&nbsp;million amortizing interest rate swap where we pay a
fixed rate of 3.615% and receive one-month LIBOR. We intend to
redesignate this swap to the estimated debt financing to be
obtained in connection with the six facilities currently leased
but expected to be purchased.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Payment Terms.</I></B> For the first four years of the
GECC mortgage loan, we are required to make monthly payments in
arrears of interest only. Commencing on April&nbsp;1, 2009, we
will also be required to make a monthly principal amortization
payment based upon the outstanding principal balance of the GECC
mortgage loan, using a 25-year period and an assumed annual
interest rate equal to 6.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Debt Service Coverage Ratio.</I></B> Commencing on
September&nbsp;30, 2005, the debt service coverage ratio
(defined in the GECC mortgage loan as the ratio of
(i)&nbsp;adjusted net operating income from the properties for
the 12-month period ending on the applicable measurement date to
(ii)&nbsp;annualized payments of debt service due on the GECC
mortgage loan for the same period) shall not, as of the end of
any calendar quarter through June&nbsp;30, 2006, fall to lower
than 1.15:1.0 or, after September&nbsp;30, 2006, fall to lower
than 1.3:1.0.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Project Yield.</I></B> Commencing on September&nbsp;30,
2005 and as of the last day of each calendar quarter through
December&nbsp;31, 2005, the project yield (defined in the GECC
mortgage loan as a percentage of (i)&nbsp;adjusted net operating
income from the properties for the 12&nbsp;month period ending
on the applicable measurement date to (ii)&nbsp;the outstanding
principal balance of the GECC mortgage loan on the applicable
measurement date) shall equal or exceed 8.5%. Commencing on
September&nbsp;30, 2006 and as of the last day of each calendar
quarter through June&nbsp;30, 2007, the project yield shall
equal or exceed 11%. Commencing on September&nbsp;30, 2007 and
commencing on the last day of each calendar quarter thereafter,
the project yield shall equal or exceed 13%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Occupancy Requirements.</I></B> Commencing on
September&nbsp;30, 2005 and as of the last day of each calendar
quarter thereafter, the average daily occupancy for the
properties for any such
</DIV>

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calendar quarter must be greater than 90% of the average daily
occupancy at the facilities at closing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Failure to Meet Debt Service Ratio, Project Yield or
Occupancy Requirement.</I></B> If we fail to meet either the
debt service coverage ratio or the project yield thresholds,
then, within ten days thereafter, we must either deposit with
the lender a letter of credit or pay down a portion of the
principal balance of the GECC mortgage loan, in each case in an
amount necessary to meet such project yield requirement or debt
service coverage ratio requirement, as applicable. Failure to
deposit such letter of credit or pay down the principal balance
of the GECC mortgage loan if either financial covenant is not
met constitutes as an event of default. Failure to maintain the
occupancy rate also constitutes an event of default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Voluntary Prepayment.</I></B> The borrowers may prepay the
GECC mortgage loan without penalty in whole or in part on or
after April&nbsp;1, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Special Purpose Entities.</I></B> In connection with the
GECC mortgage loan, the organizational documents of the
borrowers were amended to limit their purposes and to add other
provisions consistent with the provisions of the organizational
documents of special purpose entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Certain Covenants.</I></B> The GECC mortgage loan
documents include representations, warranties and covenants
customary for mortgage loans. Among other things, the borrowers
are prohibited from incurring additional indebtedness or further
encumbering their assets. In addition, so long as the GECC
mortgage loan remains outstanding, (i)&nbsp;Fortress Investment
Trust&nbsp;II or its affiliates shall own, in the aggregate,
directly or indirectly, not less than 35% of the ownership
interests in us, or (ii)&nbsp;(A)&nbsp;Wesley R. Edens shall
remain a manager of Fortress Investment Group, LLC and be our
chairman of the board of directors, (B)&nbsp;Fortress Investment
Trust&nbsp;II or its affiliates shall own, in the aggregate,
directly or indirectly, not less than ownership interests in us
that they owned at the time of this offering, or (C)&nbsp;we
must have a market capitalization equal to or greater than
$500.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Merrill Lynch Mortgage Loan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>General.</I></B> AHC Purchaser, Inc., a subsidiary of
Alterra, is the borrower under a mortgage loan made on
December&nbsp;31, 2004 by Merrill Lynch Capital, which we refer
to as the Merrill Lynch mortgage loan, with a current principal
balance of $62.5&nbsp;million and AHC Purchaser Holding&nbsp;II,
Inc., another subsidiary of Alterra, is the borrower under a
mezzanine loan made on December&nbsp;31, 2004 by Merrill Lynch
Capital, which we refer to as the junior loan, with a current
principal balance of $10.0&nbsp;million. The Merrill Lynch
mortgage loan and the junior loan both mature on
December&nbsp;31, 2007, with an option to extend the maturity
date for up to two 12-month terms, provided that both loans are
extended concurrently.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Security for the Mortgage Loan.</I></B> The Merrill Lynch
mortgage loan is secured by (i)&nbsp;mortgage liens on the
borrower&#146;s fee interests in 21 properties,
(ii)&nbsp;security liens on the borrower&#146;s personal assets,
(iii)&nbsp;an unconditional guaranty from AHC Purchaser Holding,
Inc. and Alterra for all amounts due under the Merrill Lynch
mortgage loan, and (iv)&nbsp;a pledge of 100% of the capital
stock in the borrower. The junior loan is secured by (a)&nbsp;a
collateral assignment of 100% of the capital stock of the
borrower and (b)&nbsp;a guaranty from Alterra for all amounts
due under the junior loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Interest Rate.</I></B> The Merrill Lynch mortgage loan has
an interest rate equal to the 30&nbsp;day LIBOR plus a margin of
3.642%&nbsp;per annum and the junior loan has an interest rate
equal to the 30&nbsp;day LIBOR plus a margin of 9.5%&nbsp;per
annum. If the combined interest rate (as defined under the
applicable loan documents) falls below 6.0%, then the Merrill
Lynch mortgage loan shall bear additional interest at a rate
such that the combined rate equals 6.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Interest Rate Swap.</I></B> In connection with the Merrill
Lynch mortgage loan we entered into an interest rate swap with
Merrill Lynch Capital Services, Inc. to hedge our interest rate
risk and convert the loan from a floating rate to a fixed rate
through March&nbsp;22, 2012. The notional amount of the interest
rate swap is $70.0&nbsp;million and we pay a fixed rate of 4.70%
and receive one-month LIBOR.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Voluntary Prepayments.</I></B> The borrowers may prepay
the loans in whole but not in part on or after July&nbsp;1,
2006, provided they pay an exit fee to the lender with respect
to the Merrill Lynch mortgage loan in an amount equal to
$1.875&nbsp;million through the end of calendar year 2006, and
thereafter $937,500, and with respect to the junior loan in an
amount equal to $300,000 through the end of calendar year 2006,
and thereafter $150,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Debt Service Coverage Ratio.</I></B> The debt service
coverage ratio (defined as the ratio of (i)&nbsp;net operating
income of the properties securing the loans to (ii)&nbsp;total
debt service) shall not as of the end of each calendar month
fall below 1.30:1.0.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Payment Terms.</I></B> The borrowers are required to make
monthly payments in arrears of interest on the outstanding
principal balance of the loans, and any additional interest, and
monthly principal amortization payments as set forth in a
schedule attached to the loan agreement. Commencing on
January&nbsp;1, 2008, if the project yield (defined as the
quotient of (i)&nbsp;net operating income from the properties
divided by (ii)&nbsp;the sum of the then current outstanding
principal balance plus accrued and unpaid interest (on both the
mortgage and junior loans)) for any calendar month is less than
14%, then in addition to any other required payments, the
borrowers will be required to make monthly payments to the
lender in an amount equal to approximately 64.66% of excess cash
flow of the properties (defined as net cash flow for such period
less current scheduled principal and interest payments due on
the loans).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Project Yield.</I></B> The project yield shall not, as of
the end of each calendar month, fall below 10.25% during the
first year of the loans, 11.0% during the second year of the
loans, 12.0% during the third year of the loans, and 13.0% for
all years thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Certain Covenants.</I></B> The loan documents include
representations, warranties, and covenants customary for
mortgage loans. Among other things, the borrowers are prohibited
from incurring additional indebtedness or further encumbering
their assets. Alterra may not incur any indebtedness to any of
its stockholders or affiliates, and at any time an event of
default is continuing under the loan documents, may not pay any
dividends. The loan documents also require Alterra to maintain
unrestricted cash and/or availability under lines of credit or
revolving loan agreements in the aggregate amount of at least
$8.0&nbsp;million and, in certain circumstances, at least
$10.0&nbsp;million. Provided that Merrill Lynch reasonably
determines that Alterra&#146;s fixed charge coverage ratio is
not equal to or greater than 1:1 on a prospective basis taking
into account any of the following events, Alterra may not
(i)&nbsp;declare a dividend or make other distributions of any
kind to Alterra&#146;s stockholders, (ii)&nbsp;make any asset
acquisition of $10.0&nbsp;million or more, (iii)&nbsp;enter into
any sale-leaseback transaction where the sale price is
$10.0&nbsp;million or more, (iv)&nbsp;incur any debt for
borrowed money, or (v)&nbsp;incur any lease obligations (other
than (a)&nbsp;renewals or extensions of existing leases pursuant
to options to do so in such leases, (b)&nbsp;intercompany leases
among Alterra and its direct or indirect subsidiaries and
(c)&nbsp;leases necessary for governmental compliance), whether
or not such leases are capitalized).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Transfer Restrictions.</I></B> Without the prior written
consent of Merrill Lynch, which consent may be withheld in
Merrill Lynch&#146;s sole discretion, the borrowers may not
suffer or permit (i)&nbsp;the termination of any existing
management agreement or master lease or any change in the
manager or master tenant thereunder with respect to any project,
or (ii)&nbsp;any sale, transfer, lease or pledge of (a)&nbsp;all
or any portion of any of the Merrill Lynch projects or any
portion of the properties securing the Merrill Lynch mortgage
loan, (b)&nbsp;all or any portion of borrowers&#146; right,
title and interest in and to any of the properties securing the
Merrill Lynch mortgage loan, or (c)&nbsp;any interest in the
borrowers, any master tenant or any guarantor or any interest in
any entity which holds a direct or indirect interest in, or
directly or indirectly controls, any borrower, master tenant or
guarantor. The Company has received Merrill Lynch&#146;s consent
to the consummation of this offering, as well as the applicable
formation transactions described in &#147;Business&nbsp;&#151;
History.&#148; In addition, if Alterra fails to continue to
control (x)&nbsp;the day-to-day management and operation of the
borrowers&#146; business and (y)&nbsp;all material business
decisions of the borrowers during the term of the Merrill Lynch
mortgage loan, then Merrill
</DIV>

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<DIV align="left" style="font-size: 10pt;">
Lynch may, at its option, declare the Merrill Lynch mortgage
loan to be immediately due and payable in addition to exercising
any of its other remedies permitted by the Merrill Lynch loan
documents. Furthermore, without the consent of Merrill Lynch,
the borrowers may not engage in a transfer of shares
constituting an initial public offering of Alterra, or any
direct or indirect owner of 100% of the stock of Alterra, or
similar equity sale transaction, unless such shares of Alterra,
or such direct or indirect owner of 100% of the stock of
Alterra, are listed or approved for listing on the New York
Stock Exchange, the National Association of Securities Dealers
Automated Quotation System or the American Stock Exchange at the
time of such transfer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Guaranty Bank Mortgage Loan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>General.</I></B> Five subsidiaries of BLC are borrowers
under a loan made on March&nbsp;30, 2005 by Guaranty Bank, GMAC
Commercial Mortgage Bank and GMAC Commercial Mortgage
Corporation, or the Guaranty mortgage loan, with a current
principal balance of $182.0&nbsp;million. The notes evidencing
the loan include notes&nbsp;A, which evidence
$150.0&nbsp;million of the principal amount, and notes&nbsp;B,
which evidence $32.0&nbsp;million of the principal amount, each
of which bears a different interest rate, as further described
below. We intend to use a portion of the net proceeds we receive
from this offering to repay all of the $32.0&nbsp;million
outstanding balance of the notes&nbsp;B. See &#147;Use of
Proceeds.&#148; The loan matures on April&nbsp;1, 2008, and the
borrowers have an option to extend the maturity date for up to
two 12-month terms, subject to (i)&nbsp;payment of an extension
fee in an amount equal to .25% of the principal amount for each
extension period, (ii)&nbsp;the properties securing the Guaranty
mortgage loan having achieved a debt coverage ratio (the ratio
of net operating income from the properties for the period in
question to debt service on the Guaranty mortgage loan for the
period in question) of at least 1.35 for the immediately
preceding six-month period, (iii)&nbsp;the properties having a
cumulative loan-to-value ratio (the ratio of (a)&nbsp;the sum of
the principal amount outstanding and all accrued but unpaid
interest thereon to (b)&nbsp;the appraised &#147;as is&#148;
value of the properties) of at least 75% as of the date the
notice of extension is provided, and (iv)&nbsp;the prior
reclassification of all of notes&nbsp;B into notes&nbsp;A, as
further described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Interest Rate.</I></B> The Guaranty mortgage loan has an
interest rate equal to the sum of (i)&nbsp;LIBOR plus
(ii)&nbsp;(a)&nbsp;for notes&nbsp;A prior to the first notes
resize (i.e., reclassification of certain notes&nbsp;B as
notes&nbsp;A), 3.05%, (b)&nbsp;for notes&nbsp;A, following the
first notes resize, 3.10%, (c)&nbsp;for notes&nbsp;B, 5.60%,
(d)&nbsp;for notes&nbsp;B, if the borrowers do not meet the
applicable debt coverage ratios or facility occupancy
requirements during the first year of the loan, 6.60%, and
(e)&nbsp;for notes&nbsp;B, if the borrowers do not meet the
applicable debt coverage ratios or facility occupancy
requirements from and after the second year of the loan, 7.60%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Interest Rate Swap.</I></B> In connection with the
Guaranty mortgage loan we entered into three interest rate swaps
with LaSalle Bank, N.A. to hedge our interest rate risk and
convert the loan from a floating rate to a fixed rate. The swaps
have notional amounts of $85.0&nbsp;million, $60.0&nbsp;million
and $37.0&nbsp;million, mature on March&nbsp;22, 2012,
March&nbsp;22, 2012 and March&nbsp;25, 2008 and have fixed rates
of 4.66%, 4.775% and 4.395%, respectively. For the three swaps
we pay a fixed rate and receive one-month LIBOR.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Security for the Mortgage Loan.</I></B> The loan is
secured by (i)&nbsp;mortgage liens on the borrowers&#146; fee
interests in five properties, and (ii)&nbsp;an unconditional
guaranty made by BLC to the lenders for 50% of the amount due
under the loan (such percentage to drop to 25% if certain
financial covenants are met) and for typical non-recourse carve
outs. As additional collateral for the obligations of the
borrowers under the Guaranty mortgage loan, borrowers maintain
with the lender cash or a letter of credit in the amount of
$2.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Payment Terms.</I></B> For the initial term of the
Guaranty mortgage loan, we are required to make monthly payments
in arrears of interest only on the outstanding principal balance
of the Guaranty mortgage loan. In the event that the borrowers
exercise their option to extend the term of the loan, in
addition to the regularly scheduled interest payments on the
principal amount of the Guaranty
</DIV>

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<DIV align="left" style="font-size: 10pt;">
mortgage loan, we are required to make a monthly principal
installment amount (as defined in the applicable loan documents).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Reclassification.</I></B> On or prior to February&nbsp;15,
2006, the borrowers may request that all or a portion of the
notes&nbsp;B be reallocated as notes&nbsp;A, or resized,
effective as of April&nbsp;1, 2006. The request will be granted
if no default exists at such time and if the debt coverage ratio
is at least 1.3:1.0 based upon the proposed resized notes&nbsp;A
and, with respect to the entire Guaranty mortgage loan, at least
1.1:1.0 based upon the proposed resized notes&nbsp;A and
notes&nbsp;B. On or prior to February&nbsp;15, 2007, the
borrowers may request that all or a portion of the notes&nbsp;B
be resized, effective as of April&nbsp;1, 2007. The request will
be granted if no default exists at such time and if the debt
coverage ratio is at least 1.45:1.0 based upon the proposed
resized notes&nbsp;A and, with respect to the entire Guaranty
mortgage loan, at least 1.15:1.0 based upon the proposed resized
notes&nbsp;A and notes&nbsp;B. To resize the notes on or after
April&nbsp;1, 2008, all of the notes&nbsp;A must be resized to
include the notes&nbsp;B, and the borrowers must also satisfy
the conditions required to extend the maturity date of the
Guaranty mortgage loan, including satisfaction of debt coverage
ratios.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Required Ratios.</I></B> During the first year of the
Guaranty mortgage loan, the properties securing the Guaranty
mortgage loan must have achieved a debt coverage ratio of at
least 1.2:1.0 with respect to notes&nbsp;A and a debt coverage
ratio of at least 1.0:1.0 with respect to notes&nbsp;A and
notes&nbsp;B, in the aggregate, for each calendar quarter.
During each subsequent year, the facilities must have achieved a
debt coverage ratio of at least 1.25:1.0 concerning
notes&nbsp;A, and if notes&nbsp;B are outstanding, a debt
coverage ratio of at least 1.1:1.0 concerning notes&nbsp;A and
notes&nbsp;B, in the aggregate, for each calendar quarter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the first year of the Guaranty mortgage loan, the
facilities located on the properties securing the Guaranty
mortgage loan must have achieved a minimum aggregate occupancy
ratio (as defined in the applicable loan documents) of at least
75%. During each subsequent year, the facilities must have
achieved a minimum aggregate occupancy ratio of at least 80%. As
of June&nbsp;30, 2005, the facilities&#146; aggregate occupancy
ratio was 86.5%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the borrowers fail to maintain the required debt service
coverage ratio or the minimum aggregate occupancy ratio, we may,
at our option, prevent an event of default from occurring as a
result of such failure only by delivering to the lender a fee
and additional collateral equal to: (i)&nbsp;with respect to any
first failure, a fee in the amount of $100,000 and $500,000
pledged as additional collateral for the Guaranty mortgage loan,
and (ii)&nbsp;with respect to any second failure, a fee in an
amount equal to $150,000 and $1.0&nbsp;million pledged as
additional collateral for the Guaranty mortgage loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Voluntary Prepayment.</I></B> After April&nbsp;1, 2006,
with respect to notes&nbsp;A, and at any time, with respect to
notes&nbsp;B, the borrowers may prepay all or any part of the
principal amount outstanding, together with the payment of an
exit fee to the lender in the amount of 1% of the amount of
principal being repaid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Capital Expenditures.</I></B> The borrowers are required
to expend a minimum of $300&nbsp;per unit per year for capital
expenditures with respect to the properties securing the
Guaranty mortgage loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Certain Covenants.</I></B> The loan documents include
representations, warranties and covenants customary for mortgage
loans. Among other things, the borrowers are prohibited from
incurring or permitting to exist any additional indebtedness.
The loan documents also prohibit the sale or transfer of the
direct or indirect ownership interests in the properties
securing the Guaranty mortgage loan or the borrowers without the
lenders&#146; agent&#146;s prior written consent, provided that
there are no restrictions on transfers of direct or indirect
ownership interests in BLC, subject to certain notice
requirements.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>GMAC Mortgage Loan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>General.</I></B> Nine subsidiaries of FIT REN LLC, a
wholly owned subsidiary of Alterra and an affiliate of Fortress,
are borrowers under nine separate cross-collateralized and
cross-defaulted mortgage loans in an aggregate amount of
approximately $171.0&nbsp;million, $151.4&nbsp;million of which
was funded on June&nbsp;21, 2005 in connection with the purchase
of eight facilities by GMAC Commercial Mortgage Corporation, or
the GMAC mortgage loans. The balance was funded on July&nbsp;22,
2005, upon closing of the purchase of the ninth facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Security for the GMAC Mortgage Loans.</I></B> The GMAC
mortgage loans are secured by (i)&nbsp;mortgage liens on the
borrowers&#146; fee interests in eight facilities and a ground
lease interest in one property, collectively comprising the
Prudential Portfolio, (ii)&nbsp;a security interest in
substantially all of the borrowers&#146; fixtures, equipment and
personal property, (iii)&nbsp;a guaranty for typical
non-recourse carveouts by Alterra, (iv)&nbsp;an assignment of
leases, rents, lease guarantees and like profits arising from
the properties and (v)&nbsp;an assignment of each
borrower&#146;s rights under the applicable property management
agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Interest Rate.</I></B> The GMAC mortgage loans have a
fixed interest rate equal to 5.38%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Payment Terms.</I></B> For the first five years of the
GMAC mortgage loans, the borrowers are required to make monthly
payments of interest only. During the final two years, the
borrowers will also be required to make a monthly principal
amortization payment based upon the outstanding principal
balance of the GMAC mortgage loans, using a 25-year amortization
period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Voluntary Prepayment.</I></B> The borrowers may prepay any
of the GMAC mortgage loans in whole, but not in part, at any
time during the first six and a half years of the GMAC mortgage
loans, provided that (i)&nbsp;the borrowers pay a prepayment fee
in an amount equal to the greater of 1% of the principal amount
being prepaid and the standard yield maintenance amount of the
Federal National Mortgage Association, or Fannie Mae; and
(ii)&nbsp;in connection with the release of the lien on any
individual property securing the GMAC mortgage loans, the
remaining properties, in the aggregate, maintain a debt service
coverage of at least 1.45:1.0. Any prepayment after the first
six and a half years, but before the last three months, of the
GMAC mortgage loans shall be subject to a prepayment premium
equal to 1% of the amount of principal being prepaid and no
prepayment fee shall be payable in connection with a prepayment
during the last three months of the GMAC mortgage loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Special Purpose Entities.</I></B> In connection with the
GMAC mortgage loans, the organizational documents of the
borrowers were amended to limit their purposes and to add
provisions consistent with the provisions of the organizational
documents of special purpose entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Certain Covenants.</I></B> The GMAC mortgage loan
documents include representations, warranties and covenants
customary for mortgage loans. Among other things, the borrowers
are prohibited from incurring additional indebtedness or further
encumbering their assets, unless Fannie Mae otherwise provides
additional financing. In addition, neither the properties
securing the GMAC mortgage loans nor the ownership interests in
the borrowers may be directly or indirectly transferred,
provided that such restriction does not apply to a direct or
indirect transfer of the ownership interests in the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BLC Credit Facilities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>General.</I></B> BLC is the borrower under unsecured lines
of credit in the aggregate amount of $28.6&nbsp;million,
comprised of $18.6&nbsp;million and $10.0&nbsp;million credit
facilities, made on October&nbsp;19, 2004 and March&nbsp;30,
2005, respectively, by LaSalle Bank National Association,
collectively, the BLC Credit Facilities. The $18.6&nbsp;million
credit facility consists of a $10.0&nbsp;million line of credit
and $8.6&nbsp;million in letters of credit. As of the date of
this prospectus, BLC had no outstanding balance under this
facility. The remainder of the BLC Credit Facilities is
comprised of a $10.0&nbsp;million term loan, the proceeds of
which were used by BLC to make swap termination payments.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Interest Rate.</I></B> The BLC credit facilities bear
interest at the prime rate plus 1.00%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Payment Terms.</I></B> The $18.6&nbsp;million credit
facility is payable interest only. The $10.0&nbsp;million term
loan is payable interest only monthly and principal in
consecutive quarterly installments of $0.5&nbsp;million per
quarter, commencing July&nbsp;1, 2005 until maturity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Maturity Date.</I></B> The $18.6&nbsp;million credit
facility matures on May&nbsp;31, 2006. The $10.0&nbsp;million
term loan matures on the earlier of May&nbsp;31, 2007 or an
initial public offering. We intend to use a portion of the net
proceeds we receive from this offering to repay the
$10.0&nbsp;million term loan in full. See &#147;Use of
Proceeds.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I>Certain Covenants.</I></B> The BLC Credit Facilities
require BLC to maintain a minimum debt service coverage ratio
(as defined in the applicable loan document) of 1.0:1.0.
Pursuant to the BLC Credit Facilities, BLC also may not, among
other things, (i)&nbsp;dispose of any material portion of its
properties, (ii)&nbsp;create or incur non-ordinary course debt
that has not been disclosed on its financial statements as of
the date of the loan, (iii)&nbsp;encumber any real estate that
it owns, or proceeds thereof or (iv)&nbsp;enter into non-arms
length transaction with affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>New Credit Facility</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the closing of this offering, we intend to enter into a
short-term revolving credit facility that will provide
borrowings of up to $100.0&nbsp;million; however, there can be
no assurance we will be able to obtain the credit facility or on
the terms described herein. The revolving credit facility is
expected to bear interest at the prime rate plus 1.00%. Net
proceeds from the borrowings under our revolving credit facility
are expected to be used to fund acquisitions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We expect our new credit facility will contain various financial
covenants requiring us to maintain certain financial ratios.
Specifically, our new credit facility is expected to contain
financial covenants requiring us to maintain certain cash flow
requirements. In addition, the credit facility is expected to
contain various customary restrictive covenants that will limit
our and our subsidiaries&#146; ability to, among other things,
pay dividends and incur additional indebtedness.
</DIV>

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<A name='116'></A>
</DIV>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DESCRIPTION OF CAPITAL STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>General</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, our authorized capital stock consisted of:
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    200,000,000&nbsp;shares of common stock, par value
    $0.01&nbsp;per share;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    50,000,000&nbsp;shares of preferred stock, par value
    $0.01&nbsp;per share.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, there will be
outstanding &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock and no outstanding shares of preferred stock.
All of the currently outstanding shares of common stock are
validly issued, fully paid and non-assessable under the Delaware
General Corporation Law, or the DGCL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is a summary description of all the material
terms of our capital stock. This description is qualified in its
entirety by reference to our amended and restated certificate of
incorporation and amended and restated by-laws, a copy of each
of which is filed as an exhibit to the Registration Statement of
which this prospectus is a part.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each holder of common stock is entitled to one vote for each
share of common stock held on all matters submitted to a vote of
stockholders. Except as provided with respect to any other class
or series of stock, the holders of our common stock will possess
the exclusive right to vote for the election of directors and
for all other purposes. The amended and restated certificate of
incorporation does not provide for cumulative voting in the
election of directors, which means that the holders of a
majority of the outstanding shares of common stock can elect all
of the directors standing for election, and the holders of the
remaining shares will not be able to elect any directors;
provided, however, that pursuant to the Stockholders Agreement
with FBA, Fortress Investment Trust&nbsp;II and Health Partners,
(i)&nbsp;FIG has the right to designate up to four directors to
serve on the board for so long as the Fortress Stockholders
beneficially own more than 50% of the voting power of the
Company and (ii)&nbsp;Health Partners has the right to designate
one director to serve on the board for so long as the
HP&nbsp;Stockholders beneficially own more than 5% of the voting
power of the Company. The Stockholders Agreement requires that
the Fortress Stockholders and the HP Stockholders vote or cause
to be voted all of its voting shares for the directors nominated
as described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to any preference rights of holders of our preferred
stock that the Company may issue in the future, the holders of
our common stock are entitled to receive dividends, if any,
declared from time to time by our board of directors out of
legally available funds. In the event of our liquidation,
dissolution or winding up, the holders of our common stock are
entitled to share ratably in all assets remaining after the
payment of liabilities, subject to any rights of our holders of
preferred stock to prior distribution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The holders of common stock have no preemptive, subscription,
redemption or conversion rights. Any shares of common stock sold
under this prospectus will be fully paid and non-assessable upon
issuance against full payment of the purchase price for such
shares. We intend to apply to list our common stock on the New
York Stock Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Preferred Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The board of directors has the authority, without action by our
stockholders, to issue preferred stock and to fix voting powers
for each class or series of preferred stock, and to provide that
any class or series may be subject to redemption, entitled to
receive dividends, entitled to rights upon
</DIV>

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<DIV align="left" style="font-size: 10pt;">
dissolution or convertible or exchangeable for shares of any
other class or classes of capital stock. The rights with respect
to a series or class of preferred stock may be greater than the
rights attached to our common stock. It is not possible to state
the actual effect of the issuance of any shares of our preferred
stock on the rights of holders of our common stock until our
board of directors determines the specific rights attached to
that preferred stock. The effect of issuing preferred stock
could include one or more of the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
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<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    restricting dividends in respect of our common stock;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    diluting the voting power of our common stock or providing that
    holders of preferred stock have the right to vote on matters as
    a class;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    impairing the liquidation rights of our common stock;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    delaying or preventing a change of control of Brookdale.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Agreements with Stockholders</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into agreements with certain of our stockholders
regarding voting and registration rights, among other things.
See &#147;Certain Relationships and Related Party
Transactions&nbsp;&#151; Agreements With Stockholders.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Anti-Takeover Effects of Delaware Law, Our Amended and
Restated Certificate of Incorporation and Our Amended and
Restated By-laws</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a summary of certain provisions of our amended
and restated certificate of incorporation and amended and
restated by-laws that may be deemed to have an anti-takeover
effect and may delay, deter or prevent a tender offer or
takeover attempt that a stockholder might consider to be in its
best interest, including those attempts that might result in a
premium over the market price for the shares held by
stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Authorized but Unissued Shares</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The authorized but unissued shares of our common stock and our
preferred stock will be available for future issuance without
our stockholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of
authorized but unissued shares of our common stock and our
preferred stock could render more difficult or discourage an
attempt to obtain control over us by means of a proxy contest,
tender offer, merger or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Delaware Business Combination Statute</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are organized under Delaware law. Some provisions of Delaware
law may delay or prevent a transaction which would cause a
change in our control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our amended and restated certificate of incorporation provides
that Section&nbsp;203 of the DGCL, an anti-takeover law, will
not apply to us. In general, this statute prohibits a publicly
held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three
years after the date of the transaction by which that person
became an interested stockholder, unless the business
combination is approved in a prescribed manner. For purposes of
Section&nbsp;203, a business combination includes a merger,
asset sale or other transaction resulting in a financial benefit
to the interested stockholder, and an interested stockholder is
a person who, together with affiliates and associates, owns, or
within three years prior, did own, 15% or more of voting stock.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Other Provisions of Our Amended and Restated Certificate
of Incorporation and Our Amended and Restated By-laws</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain provisions of our amended and restated certificate of
incorporation may make a change in control of Brookdale more
difficult to effect. Our amended and restated certificate of
incorporation provides for a staggered board of directors
consisting of three classes of directors. Directors of each
class are chosen for three-year terms upon the expiration of
their current terms and each year one class of our directors
will be elected by our stockholders. The terms of the first,
second and third classes will expire in 2008, 2007 and 2006,
respectively. We believe that classification of our board of
directors will help to assure the continuity and stability of
our business strategies and policies as determined by our board
of directors. Additionally, there is no cumulative voting in the
election of directors, which means that the holders of a
majority of the outstanding shares of common stock can elect all
of the directors then standing for election, and the holders of
the remaining shares will not be able to elect any directors
(except Health Partners, which may designate one director to
serve on the board pursuant to the Stockholders Agreement,
provided that Health Partners continues to own at least 5% of
the Company&nbsp;&#151; see &#147;Certain Relationships and
Related Party Transactions&nbsp;&#151; Agreements With
Stockholders&#148;). The classified board provision could have
the effect of making the replacement of incumbent directors more
time consuming and difficult. At least two annual meetings of
stockholders, instead of one, will generally be required to
effect a change in a majority of our board of directors. Thus,
the classified board provision could increase the likelihood
that incumbent directors will retain their positions. The
staggered terms of directors may delay, defer or prevent a
tender offer or an attempt to change control of us, even though
a tender offer or change in control might be in the best
interest of our stockholders. In addition, our amended and
restated by-laws provide that directors may be removed only for
cause and only with the affirmative vote of at least 80% of the
voting interest of stockholders entitled to vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to our amended and restated certificate of
incorporation, shares or our preferred stock may be issued from
time to time, and the board of directors is authorized to
determine and alter all rights, preferences, privileges,
qualifications, limitations and restrictions without limitation.
See &#147;&#151; Preferred Stock.&#148; Our amended and restated
by-laws also provide that our stockholders (with the exception
of the majority stockholder if Fortress owns at least 50% of the
then outstanding shares) are specifically denied the ability to
call a special meeting of the stockholders. Advance notice must
be provided by our stockholders to nominate persons for election
to our board of directors as well as to propose actions to be
taken at an annual meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Limitations on Liability and Indemnification of Directors and
Officers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our amended and restated certificate of incorporation and
amended and restated by-laws provide that our directors and
officers will not be personally liable to us or our stockholders
for monetary damages for breach of a fiduciary duty as a
director, except for:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any breach of the director&#146;s duty of loyalty to us or our
    stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    intentional misconduct or a knowing violation of law;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    liability under Delaware corporate law for an unlawful payment
    of dividends or an unlawful stock purchase or redemption of
    stock;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any transaction from which the director derives an improper
    personal benefit.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our amended and restated certificate of incorporation allows us
to indemnify our directors and officers to the fullest extent
permitted by Delaware law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into indemnification agreements with certain of
our directors and executive officers. These provisions and
agreements may have the practical effect in some cases of
eliminating our stockholders&#146; ability to collect monetary
damages from our directors and executive officers.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, we have been informed that, in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Corporate Opportunity</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Article&nbsp;Eight of our amended and restated certificate
of incorporation, FIT-ALT Investor, FBA, Fortress Investment
Trust&nbsp;II, Fortress Registered Investment Trust, Fortress
Brookdale Investment Fund&nbsp;LLC, and Health Partners, and
their respective subsidiaries and affiliates (collectively, the
&#147;Significant Stockholders&#148;) have the right to, and
have no duty to abstain from, exercising such right to, engage
or invest in the same or similar business as us, do business
with any of our clients, customers or vendors or employ or
otherwise engage any of our officers, directors or employees. If
the Significant Stockholders or any of their officers, directors
or employees acquire knowledge of a potential transaction that
could be a corporate opportunity, they have no duty to offer
such corporate opportunity to us, our stockholders or
affiliates. We have renounced any interest or expectancy in, or
in being offered an opportunity to participate in, such
corporate opportunities in accordance with Section&nbsp;122(17)
of the Delaware General Corporation Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event that any of our directors and officers who is also
a director, officer or employee of any of our Significant
Stockholders acquires knowledge of a corporate opportunity or is
offered a corporate opportunity, provided that this knowledge
was not acquired solely in such person&#146;s capacity as our
director or officer and such person acted in good faith, then
such person is deemed to have fully satisfied such person&#146;s
fiduciary duty and is not liable to us if any of the Significant
Stockholders pursues or acquires such corporate opportunity or
if such person did not present the corporate opportunity to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transfer Agent and Registrar</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The transfer agent and registrar for our common stock
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
The telephone number
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='117'></A>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SHARES ELIGIBLE FOR FUTURE SALE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to this offering, there has been no public market for our
common stock, and we cannot predict the effect, if any, that
market sales of shares or availability of any shares for sale
will have on the market price of our common stock prevailing
from time to time. Sales of substantial amounts of common stock
(including shares issued on the exercise of options, warrants or
convertible securities, if any) or the perception that such
sales could occur, could adversely affect the market price of
our common stock and our ability to raise additional capital
through a future sale of securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding (or a maximum
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
if the underwriters exercise their option to purchase additional
shares in full). All of
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock sold in this offering
(or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
if the underwriters exercise their option to purchase additional
shares in full) will be freely tradable without restriction or
further registration under the Securities Act, unless such
shares are purchased by &#147;affiliates&#148; as that term is
defined in Rule&nbsp;144 under the Securities Act. Subject to
certain contractual restrictions, holders of restricted shares
will be entitled to sell those shares in the public securities
markets if they qualify for an exemption from registration under
Rule&nbsp;144 or any other applicable exemption under the
Securities Act. Subject to the lock-up agreements described
below and the provisions of Rules&nbsp;144 and 144(k),
additional shares will be available for sale as set forth below.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On August&nbsp;5, 2005, BLC granted 988&nbsp;shares of stock and
FEBC-ALT Investors granted 3.33% of its membership interests to
certain members of our management, which shares and percentage
interests were subject to substantial risk of forfeiture until
the occurrence of certain events, as specified in the applicable
restricted stock or restricted securities award agreements. In
accordance with the terms of the plans, a portion of these
securities will no longer be subject to a risk of forfeiture
upon the consummation of this offering. In addition, the
remaining securities will vest over a five-year period following
the issuance if the executive remains continuously employed by
the Company. Securities that are subject to a risk of forfeiture
may not be sold or transferred. See &#147;Business&nbsp;&#151;
Equity Incentive Plans&nbsp;&#151; Employee Restricted Stock
Plans.&#148; In connection with the formation transactions
described in &#147;Business&nbsp;&#151; History,&#148; these
shares were automatically converted into an aggregate of
2,577,652&nbsp;shares of our common stock. These grants were
exempt from the registration requirements of the Securities Act
pursuant to Rule&nbsp;701.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the outstanding shares of common stock, we intend
to file a registration statement on Form&nbsp;S-8 to register an
aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock reserved for issuance under our Omnibus Stock
Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Lock-Up Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and its officers, directors and holders of
substantially all of the Company&#146;s common stock, including
the selling stockholders, have agreed with the underwriters,
subject to certain exceptions, not to dispose of or hedge any of
their common stock or securities convertible into or
exchangeable for shares of common stock during the period from
the date of this prospectus continuing through the date
120&nbsp;days after the date of this prospectus, except with the
prior written consent of the representatives. This agreement
does not apply to any existing employee benefit plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 120-day restricted period described in the preceding
paragraph will be automatically extended if (1)&nbsp;during the
last 17&nbsp;days of the 120-day restricted period the Company
issues an earnings release or announces material news or a
material event or (2)&nbsp;prior to the expiration of the
120-day restricted period, the Company announces that it will
release earnings results during the 15-day period following the
last day of the 120-day restricted period, in which case the
restrictions described in the preceding paragraph will continue
to apply until the expiration of the 18-day period beginning on
the issuance of the earnings release of the announcement of the
material news or material event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All participants in the directed shares program described under
&#147;Underwriting&#148; have also agreed to similar restriction
on the ability to sell their common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;144</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, Rule&nbsp;144 of the Securities Act as currently in
effect, provides that a person may sell within any three month
period a number of shares of the issuer that does not exceed the
greater of:
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    1% of the total number of such issuer&#146;s shares of common
    stock then outstanding, which, in our case, will equal
    approximately shares immediately after this offering;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 9pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the average weekly trading volume of the common stock on the New
    York Stock Exchange during the four calendar weeks preceding the
    filing of notice on Form&nbsp;144 with respect to the sale</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
subject to a requirement that any &#147;restricted&#148; shares
have been beneficially owned for at least one year, including
the holding period of any prior owner which was not an affiliate.
</DIV>

<P align="center" style="font-size: 10pt;">142

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<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An &#147;affiliate&#148; is a person that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with an issuer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales under Rule&nbsp;144 are also subject to manner of sale
provisions and notice requirements and to the availability of
current public information about us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rule&nbsp;144(k)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Rule&nbsp;144(k) of the Securities Act, a person (or
persons whose shares are aggregated) who is not deemed to have
been our affiliate at any time during the three months preceding
a sale, and who has beneficially owned the shares proposed to be
sold for at least two years (including the holding period of any
prior owner other than an affiliate), is entitled to sell these
shares under Rule&nbsp;144(k) without complying with the manner
of sale, public information, volume limitation or notice
provisions of Rule&nbsp;144. Therefore, unless otherwise
restricted, &#147;144(k)&#148; shares may be sold immediately
upon completion of this offering.
</DIV>

<P align="center" style="font-size: 10pt;">143

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<DIV align="left" style="font-size: 10pt;">
<A name='118'></A>
</DIV>

<!-- link1 "MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS TO NON-U.S. HOLDERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MATERIAL U.S.&nbsp;FEDERAL INCOME AND ESTATE TAX</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>CONSIDERATIONS TO NON-U.S.&nbsp;HOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following discussion is a summary of the material
U.S.&nbsp;federal income tax considerations generally applicable
to the purchase, ownership and disposition of our common stock
by Non-U.S.&nbsp;Holders (as defined below). This summary deals
only with our common stock held as capital assets by holders who
purchase common stock in this offering. This discussion does not
cover all aspects of U.S.&nbsp;federal income taxation that may
be relevant to the purchase, ownership or disposition of our
common stock by prospective investors in light of their
particular circumstances. In particular, this discussion does
not address all of the tax considerations that may be relevant
to certain types of investors subject to special treatment under
U.S.&nbsp;federal income tax laws, such as:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    dealers in securities or currencies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    financial institutions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    regulated investment companies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    real estate investment trusts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    tax-exempt entities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    insurance companies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    persons holding common stock as part of a hedging, integrated,
    conversion or constructive sale transaction or a straddle;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    traders in securities that elect to use a mark-to-market method
    of accounting for their securities holdings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    persons liable for alternative minimum tax;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    U.S.&nbsp;expatriates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    partnerships or entities or arrangements treated as a
    partnership or other pass-through entity for U.S.&nbsp;federal
    tax purposes (or investors therein);&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    U.S.&nbsp;Holders (as defined below).</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Furthermore, this summary is based upon the provisions of the
Internal Revenue Code of 1986, as amended, or the Code, the
Treasury regulations promulgated thereunder and administrative
and judicial interpretations thereof, all as of the date hereof.
Such authorities may be repealed, revoked, modified or subject
to differing interpretations, possibly on a retroactive basis,
so as to result in U.S.&nbsp;federal income tax consequences
different from those discussed below. We have not received a
ruling from the Internal Revenue Service, or the IRS, with
respect to any of the matters discussed herein. This discussion
does not address any state, local or non-U.S.&nbsp;tax
considerations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of this summary, a &#147;U.S.&nbsp;Holder&#148;
means a beneficial owner of our common stock that is for
U.S.&nbsp;federal income tax purposes one of the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a citizen or an individual resident of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a corporation (or other entity taxable as a corporation) created
    or organized in or under the laws of the United States or any
    state thereof or the District of Columbia;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an estate the income of which is subject to U.S.&nbsp;federal
    income taxation regardless of its source;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a trust if it (i)&nbsp;is subject to the primary supervision of
    a court within the United States and one or more persons have
    the authority to control all substantial decisions of the trust
    or (ii)&nbsp;has a valid election in effect under applicable
    U.S.&nbsp;Treasury regulations to be treated as a
    U.S.&nbsp;person.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">144

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a partnership or other entity or arrangement treated as a
partnership for U.S.&nbsp;federal income tax purposes holds our
common stock, the U.S.&nbsp;federal income tax treatment of a
partner in such partnership will generally depend upon the
status of the partner and the activities of the partnership. If
you are a partnership or a partner of a partnership holding our
common stock, we particularly urge you to consult your own tax
advisors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>If you are considering the purchase of our common stock, we
urge you to consult your own tax advisors concerning the
particular U.S.&nbsp;federal income tax consequences to you of
the purchase, ownership and disposition of our common stock, as
well as any consequences to you arising under state, local and
non-U.S.&nbsp;tax laws.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following discussion applies only to Non-U.S.&nbsp;Holders.
A &#147;Non-U.S.&nbsp;Holder&#148; is a beneficial owner of our
common stock (other than a partnership or an entity or
arrangement treated as a partnership for U.S.&nbsp;federal
income tax purposes) that is not a U.S.&nbsp;Holder. Special
rules may apply to you if you are a &#147;controlled foreign
corporation&#148; or a &#147;passive foreign investment
company&#148; or are otherwise subject to special treatment
under the Code. Any such holders should consult their own tax
advisors to determine the U.S., federal income, state, local and
non-U.S.&nbsp;tax consequences that may be relevant to them.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Dividends</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Dividends paid to you (to the extent paid out of our current or
accumulated earnings and profits, as determined for
U.S.&nbsp;federal income tax purposes) generally will be subject
to U.S.&nbsp;federal withholding tax at a 30% rate or such lower
rate as may be specified by an applicable tax treaty. However,
dividends that are effectively connected with a trade or
business you conduct within the United States, or, if certain
tax treaties apply, are attributable to a permanent
establishment you maintain in the United States, are not subject
to the U.S.&nbsp;federal withholding tax, but instead are
subject to U.S.&nbsp;federal income tax on a net income basis at
the applicable graduated individual or corporate rates. Special
certification and disclosure requirements must be satisfied for
effectively connected income to be exempt from withholding. If
you are a corporation, any such effectively connected dividends
that you receive may be subject to an additional branch profits
tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you wish to claim the benefit of an applicable treaty rate
for dividends paid on our common stock, you must provide the
withholding agent with a properly executed IRS Form&nbsp;W-8BEN,
claiming an exemption from or reduction in withholding under the
applicable income tax treaty. In the case of common stock held
by a foreign intermediary (other than a &#147;qualified
intermediary&#148;), the intermediary generally must provide an
IRS Form&nbsp;W-8IMY and attach thereto an appropriate
certification by each beneficial owner for which it is receiving
the dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are eligible for a reduced rate of U.S.&nbsp;federal
withholding tax pursuant to an applicable income tax treaty, you
may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the IRS.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Sale, Exchange or Other Taxable Disposition of Common
    Stock</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You generally will not be subject to U.S.&nbsp;federal income
tax with respect to gain recognized on a sale, exchange or other
taxable disposition of shares of our common stock unless:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the gain is effectively connected with your conduct of a trade
    or business in the United States, or, if certain tax treaties
    apply, is attributable to a permanent establishment you maintain
    in the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    if you are an individual and hold shares of our common stock as
    a capital asset, you are present in the United States for 183 or
    more days in the taxable year of the sale, exchange or other
    taxable disposition, and you have a &#147;tax home&#148; in the
    United States;&nbsp;or</TD>
</TR>

</TABLE>

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<FONT face="helvetica,arial">

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    we are or have been a &#147;United States real property holding
    corporation&#148; for U.S.&nbsp;federal income tax purposes at
    any time during the shorter of the five-year period preceding
    such disposition and your holding period in the common stock,
    and (i)&nbsp;you beneficially own, or have owned, more than 5%
    of the total fair market value of our common stock at any time
    during the five-year period preceding such disposition, or
    (ii)&nbsp;our common stock has ceased to be traded on an
    established securities market prior to the beginning of the
    calendar year in which the sale or disposition occurs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are an individual and are described in the first bullet
above, you will be subject to tax on any gain derived from the
sale, exchange or other taxable disposition under regular
graduated U.S.&nbsp;federal income tax rates. If you are an
individual and are described in the second bullet above, you
will be subject to a flat 30% tax on any gain derived from the
sale, exchange or other taxable disposition that may be offset
by U.S.&nbsp;source capital losses (even though you are not
considered a resident of the United States). If you are a
corporation and are described in the first bullet above, you
will be subject to tax on your gain under regular graduated
U.S.&nbsp;federal income tax rates and, in addition, may be
subject to the branch profits tax on your effectively connected
earnings and profits for the taxable year, which would include
such gain, at a rate of 30% or at such lower rate as may be
specified by an applicable income tax treaty, subject to
adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we may be a &#147;United States real property
holding corporation&#148; for U.S.&nbsp;federal income tax
purposes. Generally, a corporation is a U.S.&nbsp;real property
holding corporation if the fair market value of its
U.S.&nbsp;real property interest, as defined in the Code and
applicable regulations, equals or exceeds 50% of the aggregate
fair market value of its worldwide real property interests and
its other assets used or held for use in a trade or business. If
we are a United States real property holding corporation and you
are a holder of greater than 5% of the total fair market value
of our common stock, you should consult your tax advisor.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;Federal Estate Tax</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shares of our common stock held by an individual
Non-U.S.&nbsp;Holder at the time of his or her death will be
included in such Non-U.S.&nbsp;Holder&#146;s gross estate for
U.S.&nbsp;federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Information Reporting and Backup Withholding</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You may be subject to information reporting and backup
withholding with respect to any dividends on, and the proceeds
from dispositions of, our common stock paid to you, unless you
comply with certain reporting procedures (usually satisfied by
providing an IRS Form&nbsp;W-8BEN) or otherwise establish an
exemption. Additional rules relating to information reporting
requirements and backup withholding with respect to the payment
of proceeds from the disposition of shares of our common stock
will apply as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    If the proceeds are paid to or through the U.S.&nbsp;office of a
    broker (U.S.&nbsp;or foreign), they generally will be subject to
    backup withholding and information reporting, unless you certify
    that you are not a U.S.&nbsp;person under penalties of perjury
    (usually on an IRS Form&nbsp;W-8BEN) or otherwise establish an
    exemption;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    If the proceeds are paid to or through a non-U.S.&nbsp;office of
    a broker that is not a U.S.&nbsp;person and is not a foreign
    person with certain specified U.S.&nbsp;connections, or a
    U.S.&nbsp;Related Person, they will not be subject to backup
    withholding or information reporting;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    If the proceeds are paid to or through a non-U.S.&nbsp;office of
    a broker that is a U.S.&nbsp;person or a U.S.&nbsp;Related
    Person, they generally will be subject to information reporting
    (but not backup withholding), unless you certify that you are
    not a U.S.&nbsp;person under penalties of perjury (usually on an
    IRS Form&nbsp;W-8BEN) or otherwise establish an exemption.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, the amount of any dividends paid to you and the
amount of tax, if any, withheld from such payment generally must
be reported annually to you and the IRS. The IRS may make such
information available under the provisions of an applicable
income tax treaty to the tax authorities in the country in which
you reside.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against your U.S.&nbsp;federal
income tax liability provided the required information is timely
furnished by you to the IRS. Non-U.S.&nbsp;Holders should
consult their own tax advisors regarding the filing of a
U.S.&nbsp;tax return for claiming a refund of such backup
withholding.
</DIV>

<P align="center" style="font-size: 10pt;">147

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<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "UNDERWRITING" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNDERWRITING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company, the selling stockholders and the underwriters named
below have entered into an underwriting agreement with respect
to the shares being offered. Subject to certain conditions, each
underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman,
Sachs&nbsp;&#38; Co. and Lehman Brothers Inc. are the
representatives of the underwriters.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><FONT face="helvetica,arial">Underwriters</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Number of Shares</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Goldman, Sachs&nbsp;&#38; Co.
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lehman Brothers Inc.
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters are committed to take and pay for all of the
shares being offered, if any are taken, other than the shares
covered by the option described below unless and until this
option is exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the underwriters sell more shares than the total number set
forth in the table above, the underwriters have an option to buy
up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
from the Company to cover such sales. They may exercise that
option for 30&nbsp;days. If any shares are purchased pursuant to
this option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table
above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following tables show the per share and total underwriting
discounts and commissions to be paid to the underwriters by the
Company and the selling stockholders. Such amounts are shown
assuming both no exercise and full exercise of the
underwriters&#146; option to purchase &nbsp;additional shares.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><FONT face="helvetica,arial">Paid by the Company</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">No Exercise</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Full Exercise</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Per Share
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><FONT face="helvetica,arial">Paid by the Selling Stockholders</FONT></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">No Exercise</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Full Exercise</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Per Share
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Shares sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the
cover of this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount
of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and its officers, directors and holders of
substantially all of the Company&#146;s common stock, including
the selling stockholders, have agreed with the underwriters,
subject to certain exceptions, not to dispose of or hedge any of
their common stock or securities convertible into or
exchangeable for shares of common stock during the period from
the date of this prospectus continuing through the date
120&nbsp;days after the date of this prospectus, except with the
prior written consent of the representatives. This agreement
does not apply to any existing employee benefit plans. See
&#147;Shares Eligible for Future Sale&#148; for a discussion of
certain transfer restrictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The 120-day restricted period described in the preceding
paragraph will be automatically extended if (1)&nbsp;during the
last 17&nbsp;days of the 120-day restricted period the Company
issues an earnings release or announces material news or a
material event or (2)&nbsp;prior to the expiration of the
120-day restricted period, the Company announces that it will
release earnings results during the 15-day period following the
last day of the 120-day restricted period, in which case the
restrictions
</DIV>

<P align="center" style="font-size: 10pt;">148

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<DIV align="left" style="font-size: 10pt;">
described in the preceding paragraph will continue to apply
until the expiration of the 18-day period beginning on the
issuance of the earnings release of the announcement of the
material news or material event.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to the offering, there has been no public market for the
shares. The initial public offering price has been negotiated
among the Company and the representatives. Among the factors to
be considered in determining the initial public offering price
of the shares, in addition to prevailing market conditions, will
be the Company&#146;s historical performance, estimates of the
business potential and earnings prospects of the Company, an
assessment of the Company&#146;s management and the
consideration of the above factors in relation to market
valuation of companies in related businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An application has been made to list the common stock on the New
York Stock Exchange under the symbol &#147;BKD&#148;. In order
to meet one of the requirements for listing the common stock on
the NYSE, the underwriters have undertaken to sell lots of 100
or more shares to a minimum of 2,000 beneficial holders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the offering, the underwriters may purchase
and sell shares of common stock in the open market. These
transactions may include short sales, stabilizing transactions
and purchases to cover positions created by short sales. Shorts
sales involve the sale by the underwriters of a greater number
of shares than they are required to purchase in the offering.
&#147;Covered&#148; short sales are sales made in an amount not
greater than the underwriters&#146; option to purchase
additional shares from the Company in the offering. The
underwriters may close out any covered short position by either
exercising their option to purchase additional shares or
purchasing shares in the open market. In determining the source
of shares to close out the covered short position, the
underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to
the price at which they may purchase additional shares pursuant
to the option granted to them. &#147;Naked&#148; short sales are
any sales in excess of such option. The underwriters must close
out any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
after pricing that could adversely affect investors who purchase
in the offering. Stabilizing transactions consist of various
bids for or purchases of common stock made by the underwriters
in the open market prior to the completion of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters may also impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have repurchased shares sold by or for the
account of such underwriter in stabilizing or short covering
transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Purchases to cover a short position and stabilizing transactions
may have the effect of preventing or retarding a decline in the
market price of the Company&#146;s common stock, and, together
with the imposition of the penalty bid, may stabilize, maintain
or otherwise affect the market price of the common stock. As a
result, the price of the common stock may be higher than the
price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued at any time.
These transactions may be effected on the New York Stock
Exchange, in the over-the-counter market or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the underwriters has represented and agreed that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;it has not made or will not make an offer of shares to
the public in the United Kingdom within the meaning of
section&nbsp;102B of the Financial Services and Markets Act 2000
(as amended) (FSMA) except to legal entities which are
authorised or regulated to operate in the financial markets or,
if not so authorised or regulated, whose corporate purpose is
solely to invest in securities or otherwise in circumstances
which do not require the publication by the company of a
prospectus pursuant to the Prospectus Rules of the Financial
Services Authority (FSA);
</DIV>

<P align="center" style="font-size: 10pt;">149

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of section 21 of FSMA) to persons who have
professional experience in matters relating to investments
falling within Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 or in
circumstances in which section&nbsp;21 of FSMA would not, if the
company were not an authorised person, apply to the company; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(c)&nbsp;it has complied with, and will comply with all
applicable provisions of FSMA with respect to anything done by
it in relation to the shares in, from or otherwise involving the
United Kingdom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a Relevant
Member State), each underwriter has represented and agreed that
with effect from and including the date on which the Prospectus
Directive is implemented in that Relevant Member State (the
Relevant Implementation Date) it has not made and will not make
an offer of Shares to the public in that Relevant Member State
prior to the publication of a prospectus in relation to the
Shares which has been approved by the competent authority in
that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent
authority in that Relevant Member State, all in accordance with
the Prospectus Directive, except that it may, with effect from
and including the Relevant Implementation Date, make an offer of
Shares to the public in that Relevant Member State at any time:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a)&nbsp;to legal entities which are authorised or regulated to
operate in the financial markets or, if not so authorised or
regulated, whose corporate purpose is solely to invest in
securities;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b)&nbsp;to any legal entity which has two or more of (1) an
average of at least 250 employees during the last financial
year; (2) a total balance sheet of more than
<FONT face="helvetica,arial">&#128;</FONT>43,000,000 and (3) an
annual net turnover of more than
<FONT face="helvetica,arial">&#128;</FONT>50,000,000, as shown
in its last annual or consolidated accounts; or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(c)&nbsp;in any other circumstances which do not require the
publication by the Issuer of a prospectus pursuant to
Article&nbsp;3 of the Prospectus Directive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the purposes of this provision, the expression an
&#147;offer of Shares to the public&#148; in relation to any
Shares in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the Shares to be offered so as to enable an
investor to decide to purchase or subscribe the Shares, as the
same may be varied in that Relevant Member State by any measure
implementing the Prospectus Directive in that Relevant Member
State and the expression Prospectus Directive means
Directive&nbsp;2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The shares may not be offered or sold by means of any document
other than to persons whose ordinary business is to buy or sell
shares or debentures, whether as principal or agent, or in
circumstances which do not constitute an offer to the public
within the meaning of the Companies Ordinance
(Cap.&nbsp;32)&nbsp;of Hong Kong, and no advertisement,
invitation or document relating to the shares may be issued,
whether in Hong Kong or elsewhere, which is directed at, or the
contents of which are likely to be accessed or read by, the
public in Hong Kong (except if permitted to do so under the
securities laws of Hong Kong) other than with respect to shares
which are or are intended to be disposed of only to persons
outside Hong Kong or only to &#147;professional investors&#148;
within the meaning of the Securities and Futures Ordinance
(Cap.&nbsp;571) of Hong Kong and any rules made thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This prospectus has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus
and any other document or material in connection with the offer
or sale, or invitation or subscription or purchase, of the
securities may not be circulated or distributed, nor may the
securities be offered or sold, or be made the subject of an
invitation for subscription or purchase, whether directly or
indirectly, to persons in Singapore other than under
circumstances in which such offer, sale or invitation does not
constitute an offer or sale, or invitation for subscription or
purchase, of the securities to the public in Singapore.
</DIV>

<P align="center" style="font-size: 10pt;">150

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<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The securities have not been and will not be registered under
the Securities and Exchange Law of Japan (the Securities and
Exchange Law) and each underwriter has agreed that it will not
offer or sell any securities, directly or indirectly, in Japan
or to, or for the benefit of, any resident of Japan (which term
as used herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan),
or to others for re-offering or resale, directly or indirectly,
in Japan or to a resident of Japan, except pursuant to an
exemption from the registration requirements of, and otherwise
in compliance with, the Securities and Exchange Law and any
other applicable laws, regulations and ministerial guidelines of
Japan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters do not expect sales to discretionary accounts
to exceed five percent of the total number of shares offered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and the selling stockholders estimate that their
share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company and the selling stockholders have agreed to
indemnify the several underwriters against certain liabilities,
including liabilities under the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the underwriters and their respective affiliates
have, from time to time, performed, and may in the future
perform, various financial advisory and investment banking
services for the Company, for which they received or will
receive customary fees and expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='120'></A>
</DIV>

<!-- link1 "LEGAL MATTERS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LEGAL MATTERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain legal matters will be passed upon for us by Skadden,
Arps, Slate, Meagher&nbsp;&#38; Flom LLP, and for the
underwriters by Willkie Farr&nbsp;&#38; Gallagher LLP. Both
Skadden, Arps, Slate, Meagher&nbsp;&#38; Flom LLP and Willkie
Farr&nbsp;&#38; Gallagher LLP also represent Fortress on a
variety of past and current matters.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='121'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXPERTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The balance sheet of Brookdale Senior Living Inc. as of
July&nbsp;1, 2005, and the combined financial statements of
Brookdale/ Alterra, the Fortress CCRC Portfolio and the
Prudential Portfolio as of December&nbsp;31, 2004 and 2003, and
for each of the three years in the period ended
December&nbsp;31, 2004 appearing in this prospectus and
registration statement have been audited by Ernst&nbsp;&#38;
Young LLP, an independent registered public accounting firm, as
set forth in their reports thereon appearing elsewhere in this
prospectus, and are included in reliance upon such reports given
on the authority of such firm as experts in accounting and
auditing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated balance sheet of Alterra Healthcare Corporation
as of December&nbsp;31, 2002 and consolidated income statements,
statements of stockholder&#146;s equity and statements of cash
flows for the eleven months ended November&nbsp;30, 2003 and the
year ended December&nbsp;31, 2002 appearing in this prospectus
and registration statement have been audited by KPMG LLP, an
independent registered public accounting firm, as set forth in
their reports thereon appearing elsewhere in this prospectus,
and are included in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
The audit report covering the December&nbsp;31, 2002
consolidated financial statements contains an explanatory
paragraph that Alterra emerged from Chapter&nbsp;11 bankruptcy
on December&nbsp;4, 2003. Upon emergence from bankruptcy,
Alterra changed its basis of financial statement presentation to
reflect the adoption of fresh start accounting in accordance
with AICPA Statement of Position 90-7, <I>Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code.</I>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='122'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed a registration statement, of which this prospectus
is a part, on Form&nbsp;S-1 with the Securities and Exchange
Commission relating to this offering. This prospectus does not
contain all of the information in the registration statement and
the exhibits and financial statements included with
</DIV>

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<DIV align="left" style="font-size: 10pt;">
the registration statement. References in this prospectus to any
of our contracts, agreements or other documents are not
necessarily complete, and you should refer to the exhibits
attached to the registration statement for copies of the actual
contracts, agreements or documents. You may read and copy the
registration statement, the related exhibits and other material
we file with the Commission at the Commission&#146;s public
reference room in Washington,&nbsp;D.C. at Room&nbsp;1024,
Judiciary Plaza, 450&nbsp;Fifth Street, N.W.,
Washington,&nbsp;D.C. 20549. You can also request copies of
those documents, upon payment of a duplicating fee, by writing
to the Commission. Please call the Commission at 1-800-SEC-0330
for further information on the operation of the public reference
rooms. The Commission also maintains a website that contains
reports, proxy and information statements and other information
regarding issuers that file with the Commission. The website
address is http://www.sec.gov. You may also request a copy of
these filings, at no cost, by writing or telephoning us as
follows: Brookdale Senior Living Inc., 330&nbsp;North Wabash,
Suite&nbsp;1400, Chicago, Illinois, 60611, (312)&nbsp;977-3700.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon the effectiveness of the registration statement, we will be
subject to the informational requirements of the Exchange Act,
and, in accordance with the Exchange Act, will file reports,
proxy and information statements and other information with the
Commission. Such annual, quarterly and special reports, proxy
and information statements and other information can be
inspected and copied at the locations set forth above. We will
report our financial statements on a year ended
December&nbsp;31. We intend to furnish our stockholders with
annual reports containing consolidated financial statements
audited by our independent an independent registered public
accounting firm and with quarterly reports containing unaudited
consolidated financial statements for each of the first three
quarters of each fiscal year.
</DIV>

<P align="center" style="font-size: 10pt;">152

</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='301'></A>
</DIV>

<!-- link1 "BROOKDALE SENIOR LIVING INC." -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='123'></A>
</DIV>

<!-- link1 "INDEX" -->

<DIV align="center" style="font-size: 10pt;">
<B>INDEX</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">&nbsp;<A HREF='#302'>Unaudited
    Pro Forma Condensed Financial Information</A></FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General Information
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-2
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#303'>Unaudited Pro
    Forma Condensed Consolidated Balance Sheet as of March&nbsp;31,
    2005</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-3
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#304'>Unaudited Pro
    Forma Condensed Consolidated Statement of Operations for the
    year ended December&nbsp;31, 2004</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-4
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Unaudited Pro Forma Condensed
    Consolidated Statement of Operations for the three months ended
    March&nbsp;31, 2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-5
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#305'>Notes and
    Management&#146;s Assumption to Unaudited Pro Forma Condensed
    Consolidated Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-6
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#309'>Schedule
    I&nbsp;&#151; Unaudited Pro Forma Statement of Operations, GAAP
    EBITDA, Adjusted EBITDA and Cash Earnings</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-15
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Brookdale Senior Living
    Inc.</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#306'>Report of
    Independent Registered Public Accounting Firm</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-16
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#307'>Balance Sheet
    as of July&nbsp;1, 2005</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-17
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#308'>Notes to
    Balance Sheet</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-18
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Brookdale/ Alterra (Predecessor
    Company)</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#311'>Report of
    Independent Registered Public Accounting Firm</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-19
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#312'>Combined
    Balance Sheets</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-20
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#313'>Combined
    Statements of Operations</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-21
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#314'>Combined
    Statements of Stockholders&#146; Equity</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-22
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#315'>Combined
    Statements of Cash Flows</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-23
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#316'>Notes to
    Combined Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-27
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#317'>Schedule&nbsp;II&nbsp;&#151;
    Valuation and Qualifying Accounts</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-51
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Fortress CCRC
    Portfolio</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#320'>Report of
    Independent Registered Public Accounting Firm</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-52
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#321'>Combined
    Statements of Financial Position</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-53
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#322'>Combined
    Statements of Activities and Changes in Net Deficit</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-54
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#323'>Combined
    Statements of Cash Flows</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-55
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#324'>Notes to
    Combined Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-57
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Prudential Portfolio</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#326'>Report of
    Independent Registered Public Accounting Firm</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-64
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#327'>Combined
    Balance Sheets</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-65
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#328'>Combined
    Statements of Operations</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-66
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#329'>Combined
    Statements of Members&#146; Equity</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-67
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#330'>Combined
    Statements of Cash Flows</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-68
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#331'>Notes to
    Combined Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-69
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Alterra Healthcare
    Corporation</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#333'>Report of
    Independent Registered Public Accounting Firm</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-74
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#334'>Consolidated
    Balance Sheets</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-75
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#335'>Consolidated
    Statements of Operations</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-76
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#336'>Consolidated
    Statements of Changes in Stockholders&#146; Equity (Deficit)</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-77
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#337'>Consolidated
    Statements of Cash Flows</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-78
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">&nbsp;<A HREF='#350'>Notes to
    Consolidated Financial Statements</A>
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">F-80
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-1

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='302'></A>
</DIV>

<!-- link1 "GENERAL INFORMATION" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>GENERAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following unaudited pro forma condensed consolidated
financial information sets forth the historical financial
information as of and for the three months ended March&nbsp;31,
2005 and for the year ended December&nbsp;31, 2004 derived from
the audited financial statements of our predecessor, Brookdale/
Alterra, as adjusted to give effect to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pro forma adjustments to give effect to the Provident sale
    leaseback and Ventas operating lease on the combined statement
    of operations as if these transactions closed on January&nbsp;1,
    2004;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pro forma adjustments to give effect to the refinancing of five
    facilities, tax effect of the purchase of four of these
    facilities and termination of forward interest rate swaps as if
    these transactions closed on January&nbsp;1, 2005 and 2004;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pro forma adjustments to give effect to the CCRC Portfolio and
    Renaissance Portfolio acquisitions on the combined balance sheet
    as if these transactions closed on March&nbsp;31, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pro forma adjustments to give effect to the Fortress CCRC
    Portfolio and the Prudential Portfolio acquisitions on the
    combined statements of operations as if these transactions
    closed on January&nbsp;1, 2004;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pro forma adjustment to give effect to the step-up in basis of
    minority interest ownership due to majority stockholders&#146;
    acquiring a portion of the minority interest and the exchanges
    of Brookdale/Alterra minority ownership for Company ownership.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pro forma adjustment to give effect to the compensation expense
    in connection with the grants under the stock plan.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    incremental general and administrative expenses related to
    operating as a public company;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our initial public offering, repayment of indebtedness and other
    use of proceeds.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should read the information below along with all other
financial information and analysis presented in this prospectus,
including the section captioned &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and Brookdale/ Alterra&#146;s combined
historical financial statements and related notes included
elsewhere in this prospectus. The unaudited pro forma condensed
combined financial information is presented for informational
purposes only, and we do not expect that this information will
reflect our future results of operations or financial position.
The unaudited pro forma adjustments are based on available
information and upon assumptions that we believe are reasonable.
The unaudited pro forma financial information assumes that the
transactions and our initial offering were completed as of
March&nbsp;31, 2005 for purposes of unaudited pro forma
condensed combined balance sheet and as of January&nbsp;1, 2005
and 2004 for purposes of the unaudited pro forma condensed
combined statement of operations.
</DIV>

<P align="center" style="font-size: 10pt;">F-2

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='303'></A>
</DIV>

<!-- link1 "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>As of March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Unaudited, in thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Brookdale</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Historical</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Initial</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Senior</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Brookdale/</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Other</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Public</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Forma, as</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Living(A)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Alterra(A)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Acquisitions(D)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjustments</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Offering(C)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjusted</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Assets:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,083</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,898</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(M)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">61,482</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(N)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and investment- restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,490</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,490</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,490</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivables, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,063</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,063</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,063</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assets held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,785</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(M)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,785</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,785</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,690</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">556</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,246</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">120,111</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,954</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">115,066</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property plant and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">523,890</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">477,923</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001,813</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">119,581</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,121,394</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and investments- restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,419</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,665</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,084</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,084</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Investments in unconsolidated
    ventures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,713</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,713</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,713</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,003</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,003</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,003</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">48,287</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">48,287</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,517</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">42,770</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">729,420</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">505,545</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,214,966</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Liabilities and
    Shareholders&#146; Equity:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current portion of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,606</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,606</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,296</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,310</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current obligations on assets held
    for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">750</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">750</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">750</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Trade accounts payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,889</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,889</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,889</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued expenses and other
    liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">98,017</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,218</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">102,235</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">102,235</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">109,512</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,968</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">114,480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,296</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">113,184</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage and other indebtedness
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">312,385</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">276,756</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">589,141</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(51,010</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">538,131</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capitalized lease obligation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,284</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,284</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,284</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred gains
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">136,107</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">136,107</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(58,882</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">77,225</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Refundable entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,292</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,292</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,292</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">38,491</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">38,491</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,248</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,243</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Minority interests
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">662,815</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">306,016</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">968,831</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(119,436</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">849,395</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Commitment and contingencies
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,605</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">199,529</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(N)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246,135</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities and
    Shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">729,420</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">505,545</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,214,966</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes.
</DIV>

<P align="center" style="font-size: 10pt;">F-3

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='304'></A>
</DIV>

<!-- link1 "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>For the Year Ended December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Unaudited, in thousands, except per share amounts)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Brookdale/</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Historical</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Alterra</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Initial</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Brookdale/</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Transaction</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Other</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Public</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Alterra</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjustments</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Acquisitions</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Offering</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">As</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(A)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(B)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(D)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjustments</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(C)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjusted</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Revenue:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">657,327</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,760</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">116,759</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">783,846</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">783,846</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,545</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">648</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">250</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(I)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,443</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,443</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,953</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,953</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,953</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">660,872</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,408</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">118,712</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">250</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">790,242</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">790,242</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Operating Expenses:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">415,169</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,968</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,508</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,545</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(F)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">493,100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">493,100</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,640</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,407</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(G)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,233</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,233</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Compensation Expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(H)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,114</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,114</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">80,382</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">181,387</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,219</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">183,606</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,667</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,070</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(E)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">62,710</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,117</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">70,827</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">611,113</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">65,683</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">116,586</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,838</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">790,544</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,336</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">800,880</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Operating Income</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,759</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(55,275</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,126</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,088</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(302</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,336</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,638</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">637</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">545</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(K)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,182</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,182</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest Expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(55,851</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,389</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(83</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(E)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(41,741</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,105</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(37,636</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capitalized lease obligation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,783</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,783</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,783</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in fair value of derivatives
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,176</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,176</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(J)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain (loss) on extinguishment of
    debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,051</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(788</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(E)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">263</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">263</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in earnings of
    unconsolidated ventures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(931</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(931</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(931</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,056</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(24,886</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(14,070</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(414</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(49,426</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,231</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(55,657</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Provision for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,190</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(L)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,921</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,921</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before discounted
    operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,167</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17,696</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(14,070</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(414</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(53,347</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,231</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59,578</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(722</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">753</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17,696</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,317</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(414</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(53,316</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,231</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59,547</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Weighted average shares outstanding
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) per share:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Continuing operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes.
</DIV>

<P align="center" style="font-size: 10pt;">F-4

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>For the Three Months ended March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Unaudited, in thousands, except per share amounts)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Historical</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Other</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Initial</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Brookdale/</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Public</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Alterra(A)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Acquisitions(D)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjustments</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Offering(C)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">As Adjusted</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Revenue</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,152</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">203,264</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">203,264</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">871</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(I)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">934</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">934</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">464</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">464</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">464</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,983</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,616</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204,662</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204,662</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Operating Expenses:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110,328</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,600</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,886</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(F)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128,042</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128,042</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,433</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(602</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(G)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,331</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,331</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Compensation expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,528</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(H)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,528</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,528</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,502</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">252</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,754</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">498</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47,252</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,518</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(E)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,242</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,021</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,263</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">173,859</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28,870</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(832</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">201,897</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,519</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204,416</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating Income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,124</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">746</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">895</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,765</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,519</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">362</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(K)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">435</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">435</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest Expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,623</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,049</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(E)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,561</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,030</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,531</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capitalized lease obligation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,276</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,276</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,276</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in fair value of derivatives
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,062</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,062</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(J)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on extinguishment of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(453</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(172</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(E)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(625</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(625</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in earnings of
    unconsolidated ventures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(187</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(187</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(187</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,237</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,303</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,155</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,695</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,489</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,184</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Provision for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(L)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before discounted
    operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,403</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,303</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,155</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,861</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,489</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,350</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">96</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,207</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,155</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,835</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,489</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,324</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Weighted average shares outstanding
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) per share:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Continuing operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net Income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes.
</DIV>

<P align="center" style="font-size: 10pt;">F-5

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE SENIOR LIVING&nbsp;INC.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='305'></A>
</DIV>

<!-- link1 "NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" -->

<DIV align="center" style="font-size: 10pt;">
<B>NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Basis of Presentation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Brookdale Senior Living Inc. (the &#147;Company&#148;) formed as
a Delaware corporation on June&nbsp;28, 2005 to succeed to the
businesses of Brookdale Living Communities, Inc. and Alterra
Healthcare Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying unaudited pro forma condensed financial
information assumes that the offering and other formation
transactions described in the prospectus occurred on
March&nbsp;31, 2005 for purposes of the unaudited pro forma
consolidated balance sheet and as of January&nbsp;1, 2005 and
2004 for purposes of the unaudited pro forma consolidated
statements of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These pro forma financial statements should be read in
conjunction with the historical financial statements and notes
thereto included elsewhere in this prospectus. In
management&#146;s opinion, all adjustments necessary to reflect
the offering and the formation transactions have been made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The unaudited pro forma financial statements are not necessarily
indicative of the actual financial position as of March&nbsp;31,
2005 or what the actual results of operations of the Company
would have been assuming the offering and formation transactions
had been completed as of January&nbsp;1, 2004, nor are they
indicative of the results of operations of future periods.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Adjustments to Pro Forma Condensed Consolidated Balance Sheet
    and Statement of Operations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(A)&nbsp;Reflects historical financial position of the Company
(formed June&nbsp;28, 2005) and Brookdale/Alterra as of
March&nbsp;31, 2005 and results of operations of
Brookdale/Alterra for the three months ended March&nbsp;31, 2005
and for the year ended December&nbsp;31, 2004.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>(B)&nbsp;</B></TD>
    <TD>
    <B>Brookdale/Alterra Transaction Adjustments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reflects the effect as if Brookdale/Alterra had consummated its
2004 leases and sale leasebacks and 2005 purchase of the four
development facilities as of the beginning of the year ended
December&nbsp;31, 2004. See note&nbsp;11 &#147;Facility
Operating Leases&#148; of Notes to Brookdale/Alterra&nbsp;&#151;
Predecessor for Brookdale Senior Living Inc. beginning on page
F-47 of the Registration&nbsp;Statement. The adjustments relate
to adding the operations of the newly leased facilities as of
January&nbsp;1, 2004 (resident fees, facility operating expenses
and facility lease expenses) and the elimination of ownership
costs (interest income, depreciation and amortization expense
and interest expense) and the addition of lease expense
(facility lease expenses) associated with the lease and
sale-leaseback facilities as of January&nbsp;1, 2004. The
adjustment also includes the net effect the above adjustments
had on the overall Brookdale/Alterra income tax provision for
2004. As described in footnote&nbsp;2 on page F-29 of the
Registration Statement, four facilities that were consolidated,
but not owned in 2004, were purchased in March 2005. Included in
the 2004 adjustment to the provision for income taxes is the net
effect as if they were owned as of January&nbsp;1, 2004.
</DIV>

<P align="center" style="font-size: 10pt;">F-6

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>(C)&nbsp;</B></TD>
    <TD>
    <B>Initial Public Offering Adjustments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Balance Sheet</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following is a summary of adjustments to reflect the net
proceeds received from the offering and the use of proceeds:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gross offering proceeds from sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
    shares at $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Less sale of 4.2&nbsp;million
    common shares by minority stockholder
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Less offering costs and
    underwriters&#146; discount
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net proceeds from offering
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Retirement of certain indebtedness
    and other:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">i)&nbsp;&nbsp;Retirement of
    mortgage and other debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(62,144</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">ii)&nbsp;&nbsp;Repayment of lessor
    advances(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,228</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">iii)&nbsp;&nbsp;Purchase price of
    currently leased facilities, including fees and expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,700</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;<FONT face="helvetica,arial">&nbsp;Estimated
    debt financing to be obtained at closing
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;<FONT face="helvetica,arial">&nbsp;Release of
    cash and investments&nbsp;&#151; restricted deposit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,700</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;<FONT face="helvetica,arial">&nbsp;Total use
    of proceeds
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(74,072</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;&nbsp;&nbsp;<FONT face="helvetica,arial">&nbsp;Net excess
    cash from offering
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<FONT style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</FONT>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)</TD>
    <TD align="left">
    The amount is classified into two accounts in the condensed
    consolidated balance sheet: Other Assets for $1,006 and Other
    Liabilities for $1,222.</TD>
</TR>

</TABLE>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 5pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="6" align="left" valign="top">
    <FONT face="helvetica,arial">In connection with our IPO,
    Brookdale/Alterra will be contributed to the Company. As such,
    the minority stockholders&#146; ownership interest of Brookdale
    (50.4%) and Alterra (50.7%) will be adjusted as if their
    ownership interests were purchased by the Company. This
    adjustment reflects the step-up in the basis of assets and
    liabilities related to the minority shareholders of Brookdale
    and Alterra acquired (or exchanged) and have been adjusted to
    their fair values as of March&nbsp;31, 2005
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,702</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating leases
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">67,179</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,648</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Goodwill
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,875</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(162</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred gains
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(58,882</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred lease liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,026</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">158,428</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total step-up
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">184,716</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-7

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31, 2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31, 2005</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Statements of Operations</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility lease expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Reflects net reduction in actual
    historical lease expense from IPO related transactions:
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Purchase of leased facilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,528</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(436</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Repayment of lessor advances
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(351</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(89</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjustment for redesignation of
    interest rate swap to hedge floating rate lease payment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">706</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">175</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjustment for minority interest
    rate step-up
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,392</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">848</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,219</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">498</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>(C)&nbsp;</B></TD>
    <TD>
    <B>Initial Public Offering Adjustments (continued)&nbsp;&#151;
    Statements of Operations:</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Depreciation and amortization expense:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depreciation and Amortization expense reflects depreciation and
amortization expense on purchased lease facilities with IPO
proceeds and the Brookdale/Alterra minority ownership interest
adjustment using the straight line method over our estimated
useful lives.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Minority</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Purchased</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Shareholders</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Leased</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Interest</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Estimated</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Facilities</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjustment</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Life</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Land
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,976</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,838</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,814</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,196</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,689</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">41,885</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">40&nbsp;years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,047</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">262</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Furniture, fixtures and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">593</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">851</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,444</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7 years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">206</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease intangibles(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">935</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,324</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,259</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1 year</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,259</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,065</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating lease costs(2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">67,179</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">67,179</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,271</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">817</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">N/A</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(175</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,700</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">98,881</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">119,581</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,117</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,021</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Reflects costs allocated to in-place tenant leases of each
    facility based upon a vacancy component. We typically do not pay
    commissions or provide incentives in leasing our units. The
    individual leases were considered at market due to their
    short-term nature (one year or less in duration).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Reflects costs allocated to the facilities we operate under
    long-term operating leases. Costs are amortized over the term of
    the lease.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-8

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Interest Expense:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Reflects a net reduction in interest expense (debt) from IPO
related transactions:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Effective</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Rate</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Retirement of existing debt
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">62,144</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7.53%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,717</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,183</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">New debt related to purchase of
    leased facilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.12%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(612</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(153</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,105</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,030</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>(D)&nbsp;</B></TD>
    <TD>
    <B>Acquisitions Adjustments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reflects the actual purchase price, including closing costs, of
the Fortress CCRC Portfolio and Prudential Portfolio, that were
acquired in the second and third quarter 2005.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fortress</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">CCRC</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Prudential</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Portfolio</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Portfolio</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assets:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,898</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,898</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assets held for sale(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,500</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">523</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">556</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,921</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,954</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">191,980</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">285,943</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">477,923</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and investments&nbsp;&#151;
    restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,428</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,237</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,665</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,003</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,003</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">215,332</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290,213</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">505,545</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="15" align="left" valign="top">
    <FONT face="helvetica,arial">Liabilities and shareholders&#146;
    equity:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Obligations on assets held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">750</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">750</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts payable and other accrued
    expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,309</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">909</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,218</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,059</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">909</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,968</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage and other indebtedness
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">105,756</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">171,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">276,756</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Refundable entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,292</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,292</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">134,107</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">171,909</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">306,016</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">81,225</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">118,304</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">199,529</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities and
    shareholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">215,332</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290,213</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">505,545</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Two of the Fortress CCRC Portfolio facilities (Heritage Crossing
    and Heatherwood Village) were marketed for sale. Heatherwood
    Village was sold on July&nbsp;1, 2005 for $2.5 million and
    Heritage Crossing is under contract and scheduled to close in
    the third quarter of 2005.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-9

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE SENIOR LIVING&nbsp;INC.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='305'></A>
</DIV>

<!-- link1 "NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)" -->

<DIV align="center" style="font-size: 10pt;">
<B>NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Fortress CCRC Portfolio</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>(D)&nbsp;Acquisitions Adjustments (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Statements of Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reflects the historical operations of the facilities that would
be consistent for our ownership for the year ended
December&nbsp;31, 2004 and three months ended March&nbsp;31,
2005:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 15pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">CCRC Portfolio</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Less</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Facilities to</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Prudential</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Acquisition(1)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Be Sold(2)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Net</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Portfolio</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT face="helvetica,arial">Year ended December&nbsp;31,
    2004:</FONT></I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenue:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident Fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">80,776</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,384</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">69,392</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47,367</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">116,759</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,430</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(477</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,953</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,953</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating Expenses:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">68,079</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,108</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">56,971</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,537</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,508</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,008</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="23">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I><FONT face="helvetica,arial">Three months ended
    March&nbsp;31, 2005:</FONT></I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenue:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident Fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,706</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,754</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,952</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,200</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,152</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">560</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(96</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">464</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">464</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating Expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,574</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,754</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,820</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,780</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,600</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility lease expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">252</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">252</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="3%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Represents the historical operations at all eight Fortress CCRC
    Portfolio facilities for the periods presented.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Represents the historical operations of the two Fortress CCRC
    Portfolio facilities (Heritage Crossings and Heatherwood
    Village) that are classified as held for sale.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-10

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE SENIOR LIVING&nbsp;INC.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='305'></A>
</DIV>

<!-- link1 "NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)" -->

<DIV align="center" style="font-size: 10pt;">
<B>NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>(D) Acquisition Adjustments (continued)</B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="70%"></TD>
    <TD width="30%"></TD>
</TR>

<TR valign="top">
    <TD align="left">
    <B>Statements of Operations:</B></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="70%"></TD>
    <TD width="30%"></TD>
</TR>

<TR valign="top">
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
     The following represents the additional costs of the
    Acquisition facilities under our ownership:</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest Expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <FONT face="helvetica,arial">Reflects interest expense for debt
    incurred in<BR>
    connection with the acquisition of the properties:
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Effective</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Rate</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Fortress CCRC Portfolio
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <FONT face="helvetica,arial">$105.8&nbsp;million
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.615%</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(1)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(6,996</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(1,749</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prudential Portfolio
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <FONT face="helvetica,arial">$171.0&nbsp;million
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5.38%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(9,200</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(2,300</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(16,196</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(4,049</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="3%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Effective rate reflects interest rate under terms of a swap
    agreement.</TD>
</TR>

</TABLE>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and Administrative Expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Reflects incremental general and
    administrative expenses for the Fortress CCRC Portfolio and
    Prudential Portfolio under our ownership and management.
    Expenses primarily consist of additional salaries and wages for
    new employees:
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Fortress CCRC Portfolio
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,300</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">325</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prudential Portfolio
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">700</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">175</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">500</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-11

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and Amortization
    Expense:<BR>
    Reflects depreciation and amortization expense on the<BR>
    purchase of the Fortress CCRC Portfolio and Prudential<BR>
    Portfolio, based on the purchase<BR>
    price allocation as follows:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Estimated</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Life</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Land
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58.3&nbsp;million</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">n/a</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Building and improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">391.3&nbsp;million</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom" nowrap><FONT face="helvetica,arial">40&nbsp;years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">9,783</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2,446</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Furniture, fixtures and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10.3&nbsp;million</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom" nowrap><FONT face="helvetica,arial">7&nbsp;years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">1,484</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">372</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease Intangible(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18.0&nbsp;million</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom" nowrap><FONT face="helvetica,arial">1&nbsp;year</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">18,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">4,500</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of deferred costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">803</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">200</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">30,070</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">7,518</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Reflects costs allocated to in-place tenant leases at each of
    the acquired facilities based upon a vacancy component. We
    typically do not pay commissions or provide incentives in
    leasing our units. The individual leases were considered at
    market rate due to the short-term nature (one year or less in
    duration).</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-12

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT face="helvetica,arial">Other Adjustments:</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT face="helvetica,arial">Statement of Operations:</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(E)&nbsp;Reflects net interest
    expense in connection with the refinancing of facilities that
    closed December 2004 and March&nbsp;30, 2005, respectively, and
    interest rate swaps that closed March 2005:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Three</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Months</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Effective</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Rate</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">New mortgage loans
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">182.0&nbsp; million</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8.15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%(1)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(14,823</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,706</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage loans repaid
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">178.8&nbsp; million</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9.61</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,189</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,370</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Additional interest expense on
    refinancing and interest rate swap that closed December 2004 and
    March 2005, respectively
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="helvetica,arial">million</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%(1)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,449</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(553</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(83</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">111</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on extinguishment of debt
    (write-off of unamortized deferred financing costs) related to
    the above refinancings
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">788</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">172</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net&nbsp;amortization of deferred
    costs related to the above refinancings
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="3%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Reflects interest rate under terms of a swap agreement.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-13

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES AND MANAGEMENT&#146;S ASSUMPTIONS TO UNAUDITED</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="9" align="left" valign="top">
    <FONT face="helvetica,arial">(F)&nbsp;Reflects estimated
    synergies and operating expense reductions as a result of
    negotiated contracts with vendors such as food and insurance
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(11,545</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(2,886</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9" align="left" valign="top">
    <FONT face="helvetica,arial">(G)&nbsp;Reflects estimated
    synergies and general and administrative expense reductions
    offset by additional general and administrative expenses
    expected to be incurred to operate as a public company.
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9" align="left" valign="top">
    <FONT face="helvetica,arial">Estimated savings
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(5,107</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(1,277</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="9" align="left" valign="top">
    <FONT face="helvetica,arial">Estimated additional costs as a
    public company
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2,700</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">675</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(2,407</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">(602</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9" align="left" valign="top">
    <FONT face="helvetica,arial">(H)&nbsp;Reflects compensation
    expense in connection with grants under the Restricted Stock
    Plan&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10,114</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2,528</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9" align="left" valign="top">
    <FONT face="helvetica,arial">(I)&nbsp;Reflects estimated
    management fees for managing one Fortress CCRC Portfolio
    facility (see note&nbsp;(L)) sold July&nbsp;1, 2005 and now
    under a management agreement. Fee is based on 5% of gross
    revenues and entrance fee receipts.
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">250</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">63</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">(J)&nbsp;Reflects elimination of
    change in fair value of derivatives for forward interest rate
    swaps terminated and replaced by new interest rate swaps on
    March&nbsp;30, 2005 (note&nbsp;(E))
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,176</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,062</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">(K)&nbsp;Reflects estimated
    additional interest income from cash and cash equivalents and
    cash and investments&nbsp;&#151; restricted held in interest
    bearing accounts pursuant to the terms of the related agreement.
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">545</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">73</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">(L)&nbsp;The net effect of the
    acquisition, initial public offering and other pro forma
    adjustments results in additional losses for GAAP purposes. The
    net effect of these losses would result in no tax provision
    (benefit) as all losses would be included in the valuation
    allowance as we are in a net deferred tax asset position
    primarily due to loss carryforwards. We have applied a valuation
    allowance against the deferred tax assets.
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT face="helvetica,arial">Other Adjustments:</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <B><FONT face="helvetica,arial">Balance Sheet:</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">(M)&nbsp;Reflects sale of one
    facility held for sale on July&nbsp;1, 2005 for $2.5&nbsp;million
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">(N)&nbsp;Reflects
    $20.0&nbsp;million dividend paid to majority stockholder of
    Alterra
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-14

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Schedule&nbsp;I</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='309'></A>
</DIV>

<!-- link1 "UNAUDITED PRO FORMA STATEMENT OF OPERATIONS, GAAP EBITDA, ADJUSTED EBITDA AND CASH EARNINGS" -->

<DIV align="center" style="font-size: 10pt;">
<B>UNAUDITED PRO FORMA STATEMENT OF OPERATIONS,</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>GAAP EBITDA, ADJUSTED EBITDA AND CASH EARNINGS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Unaudited, in thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjusted</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Brookdale/</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Initial</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">GAAP</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Pro Forma</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjusted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">EBITDA</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Alterra</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Public</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Other</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">As</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">EBITDA</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">GAAP</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">EBITDA</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">and Cash</FONT></B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Historical</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Acquisitions</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Offering</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjustments</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjusted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjustments</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">EBITDA</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Adjustments</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Earnings</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Revenue:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,152</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">203,264</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">203,264</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">203,264</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">871</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">934</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">934</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">934</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">464</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">464</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(464</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">149</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(B)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">149</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,983</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,616</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204,662</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(464</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204,198</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">149</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204,347</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Operating expenses:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110,328</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,600</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,886</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128,042</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128,042</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128,042</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,433</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(602</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,331</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,331</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,331</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Compensations Expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,528</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,528</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,528</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility lease expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,502</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">252</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">498</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47,252</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47,252</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,646</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(A)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">42,606</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,518</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,021</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">128</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,263</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(15,263</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">173,859</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28,870</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,519</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(832</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">204,416</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,791</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">186,625</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,646</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">181,979</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Subtotal:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,124</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">746</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,519</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">895</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,827</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,573</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,795</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,368</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <B><FONT face="helvetica,arial">Adjustments:</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Interest expense:
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;<FONT face="helvetica,arial">Debt
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,531</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    &nbsp;&nbsp;<FONT face="helvetica,arial">Capitalized lease
    obligation
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,983</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Interest income
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">435</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Recurring capital expenditures
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,428</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Cash Earnings
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,861</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 8pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><U>Notes</U></B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(A)&nbsp;To reflect adjustment for:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Straight-line rent expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,094</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of deferred gain
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,448</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,646</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(B)&nbsp;Entrance Fees:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Received
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">686</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Disbursed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(537</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">149</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; ">

<TR style="font-size: 1pt;">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(C)&nbsp;No adjustment for Federal
    or state income taxes required as we expect to be in an NOL
    position.
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-15

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='306'></A>
</DIV>

<!-- link1 "REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Board of Directors and Stockholder of
</DIV>

<DIV align="left" style="font-size: 10pt;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brookdale Senior Living Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying balance sheet of Brookdale
Senior Living Inc. (the &#147;Company&#148;) as of July&nbsp;1,
2005. This balance sheet is the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on the balance sheet based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of
material misstatement. We were not engaged to perform an audit
of the Company&#146;s internal control over financial reporting.
Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the
Company&#146;s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of the
Company at July&nbsp;1, 2005, in conformity with
U.S.&nbsp;generally accepted accounting principles.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/&nbsp;&nbsp;Ernst &#38; Young LLP</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;">
Chicago, Illinois
</DIV>

<DIV align="left" style="font-size: 10pt;">
August&nbsp;5, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-16

</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='307'></A>
</DIV>

<!-- link1 "BALANCE SHEET" -->

<DIV align="center" style="font-size: 10pt;">
<B>BALANCE SHEET</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>July&nbsp;1, 2005</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Commitments (note&nbsp;2)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Stockholders&#146; equity:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Preferred stock, $.01&nbsp;par
    value, 5,000&nbsp;shares authorized, no shares issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Common stock, $.01&nbsp;par value,
    5,000&nbsp;shares authorized, 1,000&nbsp;shares issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Additional paid-in-capital
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">990</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to balance sheet.
</DIV>

<P align="center" style="font-size: 10pt;">F-17

</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE SENIOR LIVING INC.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='308'></A>
</DIV>

<!-- link1 "NOTES TO BALANCE SHEET" -->

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO BALANCE SHEET</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>July&nbsp;1, 2005</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Organization</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Brookdale Senior Living Inc. (the &#147;Company&#148;) was
formed as a Delaware corporation on June&nbsp;28, 2005. Under
the Certificate of Incorporation the Company is authorized to
issue up to 5,000 common shares and 5,000 of preferred shares.
The Company has had no operations since its formation.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Formation of the Company/ Initial Public Offering</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is in the process of an initial public offering of
common shares although there can be no assurance that the public
offering will occur. The Company expects to operate senior
housing facilities through various subsidiaries that will be
included in the consolidated financial statements of the Company.
</DIV>

<P align="center" style="font-size: 10pt;">F-18

</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='311'></A>
</DIV>

<!-- link1 "REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Stockholders of Brookdale Living Communities, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt;">
and Alterra Healthcare Corporation
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying combined balance sheets of
Brookdale/ Alterra (the &#147;Companies&#148;) as of
December&nbsp;31, 2004 and 2003, and the related combined
statements of operations, stockholders&#146; equity and cash
flows for each of the three years in the period ended
December&nbsp;31, 2004. Our audits also included the financial
statement schedule listed in the index. This financial statement
and schedule is the responsibility of the Companies&#146;
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Companies&#146; internal control over financial
reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companies&#146; internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in Note&nbsp;2 to the combined financial
statements, the Companies changed their method of accounting for
variable interest entities in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined financial
position of the Companies at December&nbsp;31, 2004 and 2003,
and the combined results of their operations and their cash
flows for each of the three years in the period ended
December&nbsp;31, 2004, in conformity with U.S.&nbsp;generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ Ernst &#38; Young LLP</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Chicago, Illinois
</DIV>

<DIV align="left" style="font-size: 10pt;">
August&nbsp;4, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-19

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='312'></A>
</DIV>

<!-- link1 "COMBINED BALANCE SHEETS December 31, 2004 and 2003 and March 31, 2005 (In thousands, except per share data)" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED BALANCE SHEETS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004 and 2003 and March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands, except per share data)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="15" align="left" valign="top">
    <B><FONT face="helvetica,arial">Assets</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current assets:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,083</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86,858</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">56,468</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and investments&nbsp;&#151;
    restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,490</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,528</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,787</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,063</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,062</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,472</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred income tax
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,925</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assets held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,785</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,964</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">23,572</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and other, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,690</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,891</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,554</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">120,111</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">135,303</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">140,778</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">558,073</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">557,293</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,434,789</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated depreciation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(34,183</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(33,674</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(33,628</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">523,890</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">523,619</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,401,161</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and investments&nbsp;&#151;
    restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,419</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,459</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,975</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Investment in unconsolidated
    ventures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,713</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,805</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,484</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Goodwill
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,961</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,961</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">44,650</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease security deposit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,478</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,233</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,824</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,848</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,245</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,710</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">729,420</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">746,625</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,656,582</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="15">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="15" align="left" valign="top">
    <B><FONT face="helvetica,arial">Liabilities and
    Stockholders&#146; Equity</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current portion of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,606</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,888</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">113,315</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current portion of debt on assets
    held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,577</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Unsecured line of credit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,400</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Trade accounts payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,889</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,437</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,588</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">68,764</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">77,333</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">73,146</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Tenant refundable entrance fees and
    security deposits
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,015</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,756</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,793</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,238</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,588</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,191</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,833</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">109,512</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">118,002</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">267,843</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term debt, less current portion
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">378,669</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">367,149</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">895,444</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred gains
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">136,107</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">138,402</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,886</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred lease liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,621</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,527</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,939</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">51,365</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,870</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">42,055</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,779</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">662,779</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">675,135</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,263,256</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Minority interests
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">193</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Commitments and contingencies
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Stockholders&#146;
    Equity:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Common stock, $.01&nbsp;par value,
    BLC 10&nbsp;shares authorized; 1&nbsp;share issued and
    outstanding, Alterra $.01&nbsp;per value, 1,000&nbsp;shares
    authorized, issued and outstanding, respectively
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Additional paid-in-capital
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,021</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,021</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">391,811</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated earnings (deficit)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25,050</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,312</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated other comprehensive loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(376</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,605</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">71,454</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">393,133</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities and
    stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">729,420</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">746,625</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,656,582</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-20

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='313'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF OPERATIONS Years Ended December 31, 2004, 2003 and 2002 and Three Months Ended March 31, 2005 and 2004 (In thousands, except per share data)" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED STATEMENTS OF OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, 2003 and 2002 and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2005 and 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands, except per share data)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Years Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Revenue</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">154,583</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">657,327</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">156,894</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">871</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,050</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,545</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,368</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,622</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,983</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">155,633</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">660,872</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">222,584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">161,516</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Expenses</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110,328</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,810</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">415,169</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">133,119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,980</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,433</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,239</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,640</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,540</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,502</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,825</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,744</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,003</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,597</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,708</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">173,859</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,471</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">611,113</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">202,340</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">150,231</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,124</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,162</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,759</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,244</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,285</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">362</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">224</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">637</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,004</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,899</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(18,167</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(63,634</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25,106</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,490</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in fair value of derivatives
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,062</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,832</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,176</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss from sale of properties
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(24,513</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain (loss)&nbsp;on extinguishment
    of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(453</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,051</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,511</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in earnings (loss) of
    unconsolidated ventures, net of minority interest $(7), $(6),
    $(6), $11, and $&#151;, respectively
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(187</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(373</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(931</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">318</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">584</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(974</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,237</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,960</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,056</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,509</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,383</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Provision) benefit for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">713</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(139</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before discontinued
    operations and cumulative effect of a change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,403</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,247</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,167</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,648</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on discontinued operations, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(820</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(722</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(643</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of a change in
    accounting principle, net of income taxes of $8,095
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Basic and diluted income (loss)
    per common share:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) before discontinued
    operations and cumulative effect of a change of accounting
    principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8.24</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21.15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(31.52</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717.00</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(0.07</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(0.82</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(0.72</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7.66</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(157.24</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4.47</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9.06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21.87</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(196.42</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717.00</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Basic and diluted weighted average
    number of common shares outstanding
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-21

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='314'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF STOCKHOLDERS&#146; EQUITY Years Ended December 31, 2004, 2003 and 2002 and Three Months Ended March 31, 2005 (In thousands)" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED STATEMENTS OF STOCKHOLDERS&#146; EQUITY</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, 2003 and 2002 and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Accumulated</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Common Stock</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Additional</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Accumulated</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Other</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Paid-In</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Earnings</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Comprehensive</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Stockholders&#146;</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Shares</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Capital</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Deficit)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Loss)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Equity</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balances at<BR>
    January&nbsp;1, 2002</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">315,821</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,094</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">321,915</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balances at December&nbsp;31,
    2002</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">315,821</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,811</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">333,632</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Combination of Alterra
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75,990</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balances at December&nbsp;31,
    2003</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">391,811</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,312</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">393,133</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Dividends
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(304,577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(304,577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Tax effect of pre-fresh start
    accounting net operating loss carryforward
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,787</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,787</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balances at December&nbsp;31,
    2004</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,021</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">71,454</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Unrealized loss on derivative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(376</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(376</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balances at<BR>
    March&nbsp;31, 2005</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,001</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,021</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25,050</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(376</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,605</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-22

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='315'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF CASH FLOWS" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED STATEMENTS OF CASH FLOWS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, 2003 and 2002 and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2005 and 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Years Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Cash Flows from Operating
    Activities</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,067</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,889</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(16,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,717</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating activities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on sale of properties
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,513</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss (gain)&nbsp;on extinguishment
    of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">453</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,051</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,511</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of a change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,208</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,597</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,480</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,708</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in (earnings)&nbsp;loss of
    unconsolidated ventures, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">373</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">931</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(318</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(584</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">116</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,367</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,203</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,072</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of deferred gain
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,296</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,260</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(539</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(230</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred income taxes provision
    (benefit)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">120</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,260</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,630</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(290</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,666</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in deferred lease liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,094</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,588</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,102</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,837</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in fair value of derivatives
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,062</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,832</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,176</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term debt deferred interest
    and subsequent fee added to principal, net of $&nbsp;&#151;,
    $1,059, $2,342, $2,176 and $&nbsp;&#151; paid, respectively
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">117</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,380</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">798</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,088</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Changes in operating assets and
    liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">999</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">511</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,457</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">887</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(396</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and other assets,
    net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,202</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,418</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,057</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,146</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,461</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts payable and accrued
    expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,275</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,108</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,865</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,901</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,115</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Tenant refundable entrance fees and
    security deposits
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">263</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">412</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,938</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,268</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(352</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,434</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(852</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">950</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">917</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash provided by (used in)
    operating activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,428</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,561</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">50,128</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">34,111</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39,645</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Cash Flows from Investing
    Activities</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Acquisition of leased facility
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">265</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Increase in lease security deposits
    and lease acquisition deposits, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(67</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,518</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,730</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Decrease in cash and
    investments&nbsp;&#151; restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,292</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,295</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,421</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,891</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,185</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-23

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMBINED STATEMENTS OF CASH FLOWS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, 2003 and 2002 and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2005 and 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Years Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Increase in investment
    certificates&nbsp;&#151; restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,004</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,441</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net proceeds from sale of property,
    plant and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">677</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,532</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,023</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">80,622</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Additions to property, plant and
    equipment, net of related payables
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,660</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,665</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(37,951</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,291</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,554</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from sale leaseback, net
    of costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">520,043</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents from the
    combination of Alterra
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">57,972</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Increase in reimbursable
    development costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,139</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,210</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Purchase of venture partner&#146;s
    interest
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,533</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Distribution from unconsolidated
    venture
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">538</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,772</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,915</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,150</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from sale of partnerships,
    net of minority interests
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,269</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,228</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash provided by (used in)
    investing activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,758</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,969</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">524,731</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">105,915</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(47,270</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Cash Flows from Financing
    Activities</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">192,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">340</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">79,809</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,161</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,370</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Repayment of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(179,762</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(47,379</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(312,355</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(111,220</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Payment of dividends
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(304,577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from unsecured lines of
    credit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,400</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">94,200</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">96,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,398</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Repayment of unsecured lines of
    credit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(29,300</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(99,200</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(109,702</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(98,350</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from notes payable to
    affiliates
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,633</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,150</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Payment of financing costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,762</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(788</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,346</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,102</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Payment of swap termination
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(14,065</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from deferred gain
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,655</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Advances from affiliate
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,222</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash provided by (used in)
    financing activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,589</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(45,727</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(544,469</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(85,730</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,730</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net increase (decrease) in cash and
    cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,775</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17,197</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,390</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54,296</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,105</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents at
    beginning of period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86,858</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">56,468</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">56,468</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,172</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,067</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents at end of
    period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,083</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39,271</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86,858</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">56,468</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,172</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-24

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMBINED STATEMENTS OF CASH FLOWS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, 2003 and 2002 and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2005 and 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Years Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Supplemental Disclosure of Cash
    Flow Information:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest paid
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,410</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,051</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">61,844</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25,656</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,183</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income taxes paid
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,872</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">836</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">149</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">109</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Reorganization costs paid
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,846</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Write-off of fully amortized
    intangible asset
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,404</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Write-off of deferred costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">453</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Supplemental Schedule of Noncash
    Operating, Investing and Financing Activities:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">In connection with net operating
    lease transactions and property acquisitions assets acquired and
    liabilities assumed were as follows:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment
    excluding write-off of accumulated depreciation totaling $9,577
    in 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">415,761</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">183,942</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and investments&nbsp;&#151;
    restricted, current
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">440</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,300</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,023</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and other assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other asset assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">485</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease security deposits redeemed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(156,787</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17,642</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred costs paid by lessor
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">112</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued real estate taxes assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(454</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Trade accounts payable assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(117</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Tenant refundable entrance fees and
    security deposits assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(440</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,036</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other current liabilities assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(139</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(274,641</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(119,855</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued interest assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,088</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(974</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other liabilities, cancelled
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,247</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Working capital, net acquired
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">704</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Investment certificates&nbsp;&#151;
    restricted cancelled
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(32,459</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Reimbursable development costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,405</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash paid (received)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(265</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,311</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-25

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMBINED STATEMENTS OF CASH FLOWS&nbsp;&#151; (Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Years Ended December&nbsp;31, 2004, 2003 and 2002 and</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>Three Months Ended March&nbsp;31, 2005 and 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B><FONT face="helvetica,arial">Years Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Consolidation of the development
    properties pursuant to FIN&nbsp;46R (note&nbsp;2):
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">300,405</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other assets assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,789</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Investment certificates&nbsp;&#151;
    restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(58,484</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Development fees receivable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Reimbursable development costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(42,584</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(191,543</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued interest assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,912</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued real estate taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(768</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Security deposits assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,415</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other liabilities assumed
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,488</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash paid
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Investment in unconsolidated
    ventures, net purchase of venture partner&#146;s interest in
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">GFB-AS Investors, LLC
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other assets acquired
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,641</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Investment in unconsolidated
    ventures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,926</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Minority interests
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(182</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash paid
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,533</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Reclassification of property, plant
    and equipment to investment in unconsolidated ventures in
    connection with formation of Brookdale Senior Housing, LLC, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,229</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-26

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='316'></A>
</DIV>

<!-- link1 "NOTES TO COMBINED FINANCIAL STATEMENTS" -->

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Organization</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These combined financial statements include the accounts of
Brookdale Living Communities, Inc, (&#147;BLC&#148;) a
wholly-owned subsidiary of Fortress Brookdale Acquisition LLC,
(&#147;FBA&#148;) and effective December&nbsp;1, 2003, Alterra
Healthcare Corporation (&#147;Alterra&#148; or &#147;Successor
Alterra&#148;), a wholly-owned subsidiary of FEBC ALT Investors,
LLC (&#147;FEBC&#148;). BLC and Alterra are controlled by
affiliates of the Fortress Investment Group (&#147;FIG&#148;).
We operate within one business segment with activities related
to the ownership, development, and management of senior housing
facilities in the senior independent and assisted living
segment, and provides services to the elderly through facilities
located in urban and suburban areas of major metropolitan
markets in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BLC was incorporated in Delaware on September&nbsp;4, 1996 and
commenced operations upon completion of its initial public
offering (the &#147;IPO&#148;) which closed on May&nbsp;7, 1997.
During the year ended December 2000 FBA acquired the outstanding
stock of BLC in an all cash transaction and Health Partners, a
Bermuda exempted partnership (&#147;Health Partners&#148;)
agreed to contribute its convertible subordinated note
originally due 2009 in exchange for stock of FBA. FBA is owned
by Fortress Registered Investment Trust (&#147;FRIT&#148;),
Health Partners, Fortress Brookdale Investment Fund&nbsp;LLC,
and management. As of December&nbsp;31, 2004, BLC owned or
leased 51 facilities and managed or served as management
consultant for 17 facilities for third party and affiliated
owners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
FBA sold 100% of the common stock of BLC to Provident Senior
Living Trust (&#147;Provident&#148;) on October&nbsp;19, 2004.
Prior to the sale, BLC distributed certain assets and
liabilities to a newly formed subsidiary. For financial
reporting purposes our operations include that of BLC prior to
and subsequent to the Provident transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Alterra</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Substantially all of the membership interests in FEBC are held
by Fortress Investment Trust&nbsp;I (&#147;FRIT I&#148;),
Emeritus Corporation (&#147;Emeritus&#148;), and NW Select, LLC.
Alterra owns and operates assisted living residences. As of
December&nbsp;31, 2004, the Successor Alterra operated and
managed 300 residences located in 21&nbsp;states throughout the
United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;26, 2003, a U.S.&nbsp;Bankruptcy Court entered
an order confirming Alterra&#146;s Second Amended Plan of
Reorganization. Alterra executed an Agreement and Plan of Merger
(&#147;Merger Agreement&#148;) with FEBC, pursuant to which FEBC
would acquire 100% of the common stock of the Company upon
emergence from the Chapter&nbsp;11 bankruptcy proceeding.
Pursuant to the Merger Agreement, FEBC would pay Successor
Alterra $76.0&nbsp;million of merger consideration, which may be
adjusted downward in certain circumstances. FEBC was capitalized
with $76.0&nbsp;million including (i)&nbsp;a $15.0&nbsp;million
senior loan to FEBC from an affiliate of Fortress Investment
Trust&nbsp;II LLC (&#147;FRIT&nbsp;II&#148;), a private equity
fund, and (ii)&nbsp;$61.0&nbsp;million of aggregate equity
contributions. FRIT&nbsp;II provided approximately 75% of the
equity investment to FEBC and is entitled to appoint a majority
of the directors of Alterra. Emeritus Corporation and NW Select
LLC provided the remaining equity capital to FEBC and is
entitled to appoint one director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra emerged from bankruptcy on December&nbsp;4, 2003 (the
Effective Date).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Settlement between Alterra and the committee of unsecured
creditors was finalized and approved by the Bankruptcy Court on
December&nbsp;29, 2004, for a total fixed distributable amount
of $2.45&nbsp;million. Payment of the settlement will be made
when all unsecured claims are determinable
</DIV>

<P align="center" style="font-size: 10pt;">F-27

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
and liquidated. This settlement was included in the fresh start
adjustments recognized in 2004 as an increase in current
liabilities and an increase in property, plant and equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On the Effective Date, Alterra adopted fresh start accounting
pursuant to the guidance provided by the American Institute of
Certified Public Accountant&#146;s Statement of Position
(SOP)&nbsp;90-7, <I>Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code</I>. For financial
reporting purposes, Alterra adopted the provisions of fresh
start accounting effective December&nbsp;1, 2003. In accordance
with the principles of fresh start accounting, Alterra has
adjusted its assets and liabilities to their fair values as of
December&nbsp;1, 2003. Alterra&#146;s reorganization value was
determined to be equal to the cash amount paid for all of the
outstanding common stock of Alterra plus the post-emergence
liabilities existing at the reorganization date. To the extent
the fair value of its tangible and identifiable intangible
assets net of liabilities exceeded the reorganization value, the
excess was recorded as a reduction of the amounts allocated to
property and equipment and leasehold intangibles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra&#146;s condensed consolidated balance sheet reflecting
the application of fresh start accounting as of December&nbsp;1,
2003 is summarized as follows ($&nbsp;in&nbsp;000&#146;s):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Assets</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current assets:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">57,972</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,014</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assets held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,537</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and supply
    inventory
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,446</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,881</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,850</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">392,298</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,556</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">552,704</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="7" align="left" valign="top">
    <B><FONT face="helvetica,arial">Liabilities and
    Stockholders&#146; Equity</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current installments of long-term
    obligations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">68,951</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current debt maturities on assets
    held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,214</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,880</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">74,777</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,381</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">210,203</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term obligations, less current
    installments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">264,256</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,245</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">476,704</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Stockholders&#146; equity (deficit)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities and
    stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">552,704</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-28

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Basis of Presentation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying combined financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States (&#147;GAAP&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The accompanying unaudited combined financial statements as of
March&nbsp;31, 2005 and for the three months ended
March&nbsp;31, 2005 and 2004 have been prepared in accordance
with GAAP for interim financial information. Accordingly, they
do not include all of the information and notes required by GAAP
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
All amounts included in the notes to the combined financial
statements, referring to March&nbsp;31, 2005 and 2004 are
unaudited. Operating results for the three month periods ending
March&nbsp;31, 2005 are not necessarily indicative of the
results that maybe expected for the year ending
December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Principles of Consolidation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements include the accounts of BLC
and Alterra (commencing December&nbsp;1, 2003) and their
majority-owned subsidiaries. Results of operations of the
majority-owned subsidiaries are included from the date of
acquisition. All significant intercompany balances and
transactions have been eliminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, the Financial Accounting Standards Board
(&#147;FASB&#148;) issued a revised Interpretation No.&nbsp;46,
<I>Consolidation of Variable Interest Entities</I>, an
interpretation of ARB No.&nbsp;51 (&#147;FIN&nbsp;46R&#148;).
This Interpretation addresses the consolidation by business
enterprises of primary beneficiaries in variable interest
entities (&#147;VIE&#148;) as defined in the Interpretation. A
company that holds variable interests in an entity will need to
consolidate the entity if its interest in the VIE is such that
it will absorb a majority of the VIE&#146;s losses and/or
receive a majority of expected residual returns, if they occur.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We developed and manage five facilities for third party entities
in which we have guaranteed certain debt obligations and have
the right to purchase or lease the facilities (as defined). We
evaluated our relationship with the entities pursuant to
FIN&nbsp;46R and determined they are VIE&#146;s of which the
Company is the primary beneficiary. We elected to adopt
FIN&nbsp;46R as of December&nbsp;31, 2003 and accordingly,
consolidated the entities as of December&nbsp;31, 2003 in the
accompanying financial statements. The consolidated assets and
liabilities of the entities primarily consist of property,
plant, equipment and related debt.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Facilities</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total Units</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Meadows of Glen Ellyn
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">234</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Heritage of Raleigh
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">219</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Hallmark, Battery Park City
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Trillium Place
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">216</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Hallmark of Creve Coeur
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">218</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,104</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;1, 2005, we obtained legal title to four of the
VIE&#146;s (The Meadows of Glen Ellyn, The Heritage of Raleigh,
Trillium Place and The Hallmark of Creve Coeur facilities). As
these four VIE&#146;s
</DIV>

<P align="center" style="font-size: 10pt;">F-29

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
were previously consolidated pursuant to FIN&nbsp;46R, the legal
acquisition of the facilities had minimal accounting impact. At
March&nbsp;31, 2005, The Hallmark, Battery Park City remains
consolidated pursuant to FIN&nbsp;46R. Prior to consolidating
these facilities in our financial statements, we recorded
management fees of 5% - 7% of gross revenues in our combined
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Investment in Unconsolidated Ventures</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The equity method of accounting has been applied in the
accompanying financial statements with respect to our investment
in unconsolidated ventures that are not considered VIE&#146;s as
we do not possess a controlling financial interest (note&nbsp;3).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>New Accounting Pronouncements</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued Statement of Financial
Accounting Standards (SFAS)&nbsp;No.&nbsp;123 (revised),
<I>Share-Based Payment</I>, which addresses the accounting for
transactions in which an entity exchanges its equity instruments
for goods or services, with a primary focus on transactions in
which an entity obtains employee services in share-based payment
transactions. SFAS&nbsp;No.&nbsp;123R is a revision to
SFAS&nbsp;No.&nbsp;123 and supersedes Accounting Principles
Board (APB)&nbsp;Opinion No.&nbsp;25, <I>Accounting for Stock
Issued to Employees</I>, and its related implementation
guidance. This Statement will require measurement of the cost of
employee services received in exchange for stock compensation
based on the grant-date fair value of the employee stock
options. Incremental compensation costs arising from subsequent
modifications of awards after the grant date must be recognized.
This Statement will be effective for us as of January&nbsp;1,
2006. The impact of adoption of this Statement is not known at
this time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Use of Estimates</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of the combined financial statements in
accordance with GAAP requires management to make estimates and
assumptions that affect amounts reported and disclosures of
contingent assets and liabilities in the consolidated financial
statements and accompanying notes. Actual results could differ
from those estimates and assumptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash and Cash Equivalents</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We consider all investments with an original maturity of three
months or less to be cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Accounts Receivable</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accounts receivable are reported net of an allowance for
doubtful accounts, to represent our estimate of the amount that
ultimately will be realized in cash. The allowance for doubtful
accounts was $2.7 and $2.9&nbsp;million and $7.6&nbsp;million as
of March&nbsp;31, 2005 and December&nbsp;31, 2004 and 2003,
respectively. The adequacy of our allowance for doubtful
accounts is reviewed on an ongoing basis, using historical
payment trends, write-off experience, analyses of receivable
portfolios by payor source and aging of receivables, as well as
a review of specific accounts, and adjustments are made to the
allowance as necessary.
</DIV>

<P align="center" style="font-size: 10pt;">F-30

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Resident Fee Revenue</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Resident fee revenue is recorded when services are rendered and
consists of fees for basic housing, support services and fees
associated with additional services such as personalized health
and assisted living care. Residency agreements are generally for
a term of one year or less.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Management Fee Revenue</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management fee revenue is recorded as services provided to the
owners of the facilities. Revenues are determined by an agreed
upon percentage of gross revenues (as defined).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash and Investments&nbsp;&#151; Restricted</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash and investments&nbsp;&#151; restricted consist principally
of deposits required by certain lenders and lessors pursuant to
the applicable agreement and consist of the following as of
March&nbsp;31 and December&nbsp;31:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Real estate taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,979</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,281</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,616</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Tenant security deposits
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,951</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,089</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,611</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Replacement reserve and other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,560</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,139</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,560</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Construction loan collateral
    (note&nbsp;7)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,019</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Subtotal
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,490</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,528</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,787</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Non-current:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Collateral deposit for interest
    rate swaps (note&nbsp;8)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,250</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,565</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Insurance reserves
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,118</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,918</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,247</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Debt service reserves
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,051</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,537</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,163</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Subtotal
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,419</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,459</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,975</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">42,909</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47,987</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54,762</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Eight facilities located in Illinois are required to make escrow
deposits under the Illinois Life Care Facility Act. As of
December&nbsp;31, 2004 and 2003, required deposits were $8,519
and $6,640, respectively, all of which were made in the form of
letters of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Assets Held for Sale</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We record an impairment loss on facilities held for sale
whenever their carrying value cannot be fully recovered through
the estimated cash flows, including net sale proceeds. The
amount of the impairment loss recognized is the difference
between the carrying value and the estimated fair value less
costs to sell. Our policy is to consider a facility to be held
for sale when we have committed to a plan to sell such facility
and active marketing activity has commenced or it is expected to
commence in the near term. Depreciation is suspended during the
period the assets are held for sale. Assets held for sale
principally comprises current assets and liabilities and net
property, plant and equipment. The corresponding mortgage
liability is recorded in current debt maturities on assets held
</DIV>

<P align="center" style="font-size: 10pt;">F-31

</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
for sale. We expect to sell these facilities and land parcels
within twelve months of the date they are designated as held for
sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Income Taxes</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income taxes are accounted for under the asset and liability
approach which requires recognition of deferred tax assets and
liabilities for the differences between the financial reporting
and tax bases of assets and liabilities. A valuation allowance
reduces deferred tax assets when it is more likely than not that
some portion or all of the deferred tax assets will not be
realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Property, Plant and Equipment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment are carried at cost less
accumulated depreciation. Expenditures for ordinary maintenance
and repairs are expensed to operations as incurred. Renovations
and improvements, which improve and/or extend the useful life of
the asset are capitalized and depreciated over their estimated
useful life, or if the renovations or improvements are made with
respect to facilities subject to an operating lease, over the
shorter of the estimated useful life of the renovations or
improvements, or the term of the operating lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with SFAS&nbsp;No.&nbsp;144 <I>Accounting for the
Impairment or Disposal of Long-Lived Assets and Long-Lived
Assets to Be Disposed,</I> we will record impairment losses on
long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those
assets during the expected hold period are less than the
carrying amounts of those assets. Impairment losses will be
measured as the difference between carrying value and fair value
of assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We allocate the purchase price of facilities to net tangible and
identified intangible assets acquired based on their fair values
in accordance with the provisions SFAS&nbsp;No.&nbsp;141
<I>Business Combinations.</I> In making estimates of the fair
values of the tangible and intangible assets for purposes of
allocating purchase price, we consider information obtained
about each property as a result of its pre-acquisition due
diligence, marketing, leasing activities and independent
appraisals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We allocate a portion of the purchase price to the value of
leases acquired based on the difference between the facilities
valued with existing in-place leases adjusted to market rental
rates and the property valued as if vacant. Factors management
considers in its analysis include an estimate of carrying costs
during the expected lease-up periods considering current market
conditions and costs to execute similar leases. In estimating
carrying costs, management includes estimates of lost rentals
during the lease-up period and estimated costs to execute
similar leases. The value of in-place leases is amortized to
expense over the remaining initial term of the respective leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depreciation is provided on a straight-line basis over the
estimated useful lives of assets, which are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Asset Category</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Estimated&nbsp;Useful&nbsp;Life</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <FONT face="helvetica,arial">40&nbsp;years
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Leasehold intangibles and
    improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <FONT face="helvetica,arial">1&nbsp;-&nbsp;18&nbsp;years
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Furniture and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <FONT face="helvetica,arial">3&nbsp;-&nbsp;7&nbsp;years
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident lease intangibles
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    <FONT face="helvetica,arial">1&nbsp;year
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-32

</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Deferred Costs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred financing and lease costs are recorded at cost and
amortized on a straight-line basis, which approximates the level
yield method, over the term of the related debt or lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Earnings per Share</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basic and diluted earnings per share is computed by dividing net
income (loss) by the weighted average number of common shares
outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Fair Value of Financial Instruments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash and cash equivalents, cash and investments-restricted and
variable rate debt are reflected in the accompanying
consolidated balance sheets at amounts considered by management
to reasonably approximate fair value. Management estimates the
fair value of its long-term fixed rate debt using a discounted
cash flow analysis based upon our current borrowing rate for
debt with similar maturities. As of December&nbsp;31, 2004 and
2003, the fair value of fixed rate debt approximates its book
value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Derivative Financial Instruments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the normal course of business, we use a variety of financial
instruments to manage or hedge interest rate risk. We have
entered into certain interest rate protection and swap
agreements to effectively cap or convert floating rate debt to a
fixed rate basis, fixed rate debt to a floating rate basis, as
well as to hedge anticipated future financing transactions. All
derivative instruments are recognized as either assets or
liabilities in the combined balance sheet at fair value. The
change in mark-to-market of the value of the derivative is
recorded as an adjustment to income or other comprehensive
income (loss) depending upon whether it has been designated and
qualifies as part of a hedging relationship.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not enter into derivative contracts for trading or
speculative purposes. Furthermore, we have a policy of only
entering into contracts with major financial institutions based
upon their credit rating and other factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We assumed certain interest rate protection and swap agreements
when we consolidated the VIE&#146;s as of December&nbsp;31, 2003
to convert or cap floating rate debt to a fixed rate basis, as
well as to hedge anticipated future financing. In conjunction
with FIN&nbsp;46R we recorded a cumulative effect of a change in
accounting principle resulting in a loss of $13,208, net of tax,
for the year ended December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Goodwill</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Goodwill relates to FBA&#146;s acquisition of BLC in 2000. This
cost is not amortized and we perform an annual impairment test
in accordance with SFAS&nbsp;No.&nbsp;142, <I>Goodwill and Other
Intangible Assets</I>. We will record impairment losses on the
goodwill acquired when events and circumstances indicate that
the asset might be impaired. Impairment losses are measured as
the difference between carrying value and fair value of our net
assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have one reporting unit which is the operation of senior
housing facilities. As more fully described in note&nbsp;11, we
sold certain facilities to which we had allocated the goodwill
based upon the relative fair values at the point in time that
the original goodwill arose. Included in the deferred gain
calculation is the write-off of $35,689 of goodwill associated
with the facilities sold.
</DIV>

<P align="center" style="font-size: 10pt;">F-33

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Self-Insurance Liability Accruals</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are subject to various legal proceedings and claims that
arise in the ordinary course of our business. Although we
maintain general liability and professional liability insurance
policies for our owned, leased and managed facilities under a
master insurance program, our current policy provides for
deductibles of $1.0&nbsp;million for each and every claim. As a
result, we are self-insured for most typical claims. In
addition, we maintain a self-insured workers compensation
program (with excess loss coverage of $250,000 to
$500,000&nbsp;per individual claim) and a self insured employee
medical program (with excess loss coverage of $200,000 to
$300,000&nbsp;per claim). We are self-insured for amounts below
these excess loss coverage amounts. We review the adequacy of
our accruals related to these liabilities on an ongoing basis,
using historical claims, actual valuations, third party
administrator estimates, consultants, advice form legal counsel
and industry, and adjust accruals periodically. Estimated costs
related to these self-insurance programs are accrued based on
known claims and projected claims incurred but not yet reported.
Subsequent changes in actual experience are monitored and
estimates are updated as information is available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Comprehensive Income</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SFAS&nbsp;No.&nbsp;130, &#147;Reporting Comprehensive
Income,&#148; establishes guidelines for the reporting and
display of comprehensive income and its components in financial
statements. Comprehensive income includes net income and all
other non-owner changes in shareholders&#146; equity during a
period including unrealized gains and losses on equity
securities classified as available-for-sale and unrealized fair
value adjustments on certain derivative instruments. Net income
(loss) equals comprehensive income (loss) for each of the three
years in the period ended December&nbsp;31, 2004. Comprehensive
loss for the three months ended March&nbsp;31, 2005 equals
$4,849.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Advertising Costs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Advertising costs are expensed as incurred and were $5,968,
$2,072, and $1,568, for the years ended December&nbsp;31, 2004,
2003 and 2002, respectively and $1,429, and $1,377, for the
three months ended March&nbsp;31, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Facility Leases</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, as lessee, make a determination with respect to each of the
facility leases whether they should be accounted for as
operating leases or capital leases. We base our classification
criteria on estimates regarding the fair value of the leased
facility, minimum lease payments, our effective cost of funds,
the economic life of the facility and certain other terms in the
lease agreements. The initial lease terms vary from 15 to
20&nbsp;years. Facilities under operating leases are accounted
for in our statement of operations as lease expense for actual
rent paid plus or minus a straight-line adjustment for estimated
minimum lease escalators and amortization of deferred gains in
situations where sale-leaseback transactions have occurred. For
facilities under capital lease and lease financing obligation
arrangements, a liability is established on our balance sheet
and a corresponding long-term asset is recorded. In addition, we
amortize leasehold improvements purchased during the term of the
lease over the shorter of their economic life or the lease term.
Sale lease back transactions are recorded as lease financing
obligations when the transactions include a form of continuing
involvement, such as purchase options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of our leases contain fixed or formula based rent
escalators. To the extent that the escalator increases are tied
to a fixed index or rate, lease payments are accounted for on a
straight-line basis
</DIV>

<P align="center" style="font-size: 10pt;">F-34

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
over the life of the lease. In addition, we recognize all
rent-free or rent holiday periods in operating leases on a
straight-line basis over the leased term, including the rent
holiday period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A summary of facility lease expense and the impact of
straight-line adjustment amortization of deferred gains for the
three months ended March&nbsp;31, and the years ended
December&nbsp;31 are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash basis payment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">42,704</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,022</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">97,669</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,181</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,426</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Straight-line expense (income)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,094</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,588</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,102</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,837</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of deferred gain
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,296</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,260</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(539</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(230</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,502</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,825</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">99,997</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,744</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,033</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Sale Leaseback</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sale leaseback accounting is applied to transactions in which a
residence is sold and leased back from the buyer. Under sale
leaseback accounting, we remove the property and related
liabilities from the balance sheet. Gain on the sale is deferred
and recognized as a reduction of rent expense for operating
leases and a reduction of amortization expense for capital
leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Reclassifications</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain prior period amounts have been reclassified to conform
to the current financial statement presentation, with no effect
on our consolidated financial position or results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Investment in Unconsolidated Ventures</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>GFB-AS Investors, LLC</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;30, 2001, BLC acquired a 45% interest in GFB-AS
Investors, LLC (&#147;GFB&#148;), a Delaware limited liability
company, and GFB, in turn, acquired management contract rights,
loans receivable, and the equity interests in the general
partners of various partnerships (the &#147;GC Property
Partnerships&#148;) previously owned or controlled by affiliates
of Grand Court Lifestyles, Inc. Each GC Property Partnership
owns a senior housing facility (the &#147;GC Facilities&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The total initial investment in GFB was $12,750, of which our
share was $5,738. On September&nbsp;7, 2002, GFB purchased a
portion of the limited partners&#146; interests in 15 of the GC
Property Partnerships. The members contributed an additional
$2,556 to fund these purchases of which the Company&#146;s share
was $1,150. Our investment in GFB was funded from the proceeds
of a loan made by its majority shareholder of FBA which bore
interest at 15%&nbsp;per annum. We accounted for GFB&#146;s
limited partner interests in the GC Property Partnerships under
the equity method of accounting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;29, 2003, we purchased the remaining 55% interest in
GFB for $10,533, all of which was funded by additional loans
made by the shareholders of FBA. The existing loan to the
majority shareholder was amended and restated in connection with
the transaction and a restatement fee (as defined) of $857
incurred and included in interest expense in the accompanying
consolidated statement of operations. We incurred interest
totaling $&#151; and $883 and $1,079, $3,418 and $1,102
</DIV>

<P align="center" style="font-size: 10pt;">F-35

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
on the shareholder loans for the three months ended
March&nbsp;31, 2005 and 2004 and years ended December&nbsp;31,
2004, 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For financial reporting purposes, the assets acquired and
liabilities assumed, as well as the results of operations of GFB
subsequent to May&nbsp;29, 2003, are included in our combined
financial statements. We accounted for our investment in GFB
under the equity method prior to that date due to lack of
control. The portion of the purchase price allocated to
GFB&#146;s assets is included in other long-term assets in the
accompanying combined balance sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004 and 2003, we have management
consulting and supervisory agreements with three and 19 GC
Property Facilities, respectively, providing for a fee payable
in the amount of 2.8% of the gross revenues. Fees from the GC
Facilities totaled $102 and $434 and $816, $2,363 and $2,317 for
the three months ended March&nbsp;31, 2005 and 2004
(unaudited)&nbsp;and years ended December&nbsp;31, 2004, 2003
and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the quarter ended March&nbsp;31, 2004, 14 GC Property
Partnerships in which GFB had general and limited partnership
interests, sold the facilities to Ventas, Inc. (note&nbsp;9).
Upon the sale of the 14 GC Facilities and one additional GC
Facility, we received approximately $9,228 from our investment
in loans receivable and $3,989 from our general and limited
partnership interests. We did not recognize any gain or loss
related to these transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Brookdale Senior Housing, LLC</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;27, 2002, we purchased The Heritage at Gaines
Ranch, a 207-unit facility located in Austin, Texas
(&#147;Austin&#148;), The Heritage of Southfield, a 217-unit
facility located in Southfield, Michigan
(&#147;Southfield&#148;), and The Devonshire of Mt. Lebanon, a
218-unit facility located in Mt. Lebanon (Pittsburgh),
Pennsylvania (&#147;Mt. Lebanon&#148;) which were developed and
managed for third party owners. The total purchase price
included cash of $41 plus the assumption of all liabilities,
including $76,132 of first mortgage loans and $13,391 of
mezzanine financing provided by a subordinate lender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The three facilities were encumbered by first mortgage notes
payable totaling $76,132 originally due September&nbsp;26, 2002
and March&nbsp;11, 2003. The mortgage loans were
cross-collateralized and partially guaranteed by BLC. Upon the
non-payment of the mortgage loans due September&nbsp;26, 2002,
the first mortgage lender declared an event of default and
accelerated the due date on the remaining loan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We reached an agreement with the first mortgage lender on
August&nbsp;8, 2003 to restructure the first mortgage loans
which gave us the right to payoff the first mortgage loans at an
agreed upon amount on or before December&nbsp;31, 2003. For the
period November&nbsp;1, 2002, through August&nbsp;8, 2003 the
lender retained all rental receipts and we paid certain of the
facilities operating expenses. The agreement also provided,
among other things, for the first mortgage lender to forbear
with respect to the acceleration notices and interest to accrue
on the loan balances at the stated rate of LIBOR plus 3%. The
mezzanine loans related to the Austin and Southfield facilities
also matured on September&nbsp;26, 2002 and we reached an
agreement with the subordinated lender to forbear on all claims
until February&nbsp;1, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On September&nbsp;30, 2003, we formed the Brookdale Senior
Housing, LLC joint venture (&#147;Venture&#148;) with a third
party (&#147;Venture Partner&#148;) and effectively sold 75% of
our interest in the Southfield and Mt. Lebanon facilities. The
Venture owns the Southfield and Mt. Lebanon facilities and
provided mezzanine financing for the Austin facility. The
Venture was capitalized with $66,328 of
</DIV>

<P align="center" style="font-size: 10pt;">F-36

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
cash of which $144 was contributed by us and the balance of
$66,184 from the Venture Partner in the form of $35,829 of
equity and $30,355 first mortgage financing. The first mortgage
loans are secured by the Southfield and Mt. Lebanon facilities
payable interest only at the rate of 6.75% through
September&nbsp;30, 2008 and 7.25% through maturity on
October&nbsp;1, 2009. The difference between the carrying amount
of this investment and the value of the underlying equity is
amortized as an adjustment to earnings from unconsolidated joint
ventures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Venture made a $12,739 mezzanine loan to the Austin facility
payable interest at the rate of all available cash flow, as
defined, and entitled the Venture to receive all appreciation in
the facility. In addition, the Venture Partner made a first
mortgage loan of $16,422 secured by the Austin facility and on
the same terms as the Southfield and Mt. Lebanon first mortgage
loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Venture agreement provides that all operating cash flow is
distributed to the Venture Partner until they receive a 16%
cumulative preferred return and then 60% to the Venture Partner
and 40% to us. Sale or refinancing proceeds are to be
distributed first to the Venture Partner until they receive
their cumulative preferred return; second to the venture partner
until they receive the return of their contributed equity; and
then 60% to the Venture Partner and 40% to us. Additional
capital contributions, if any, are to be contributed 75% by the
Venture Partner and 25% by us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the sale of its interest in the Southfield
and Mt. Lebanon facilities to the Venture, we received net
proceeds of $51,647, which resulted in a loss on the sale of
$24,513. The Company used the proceeds to repay the existing
first mortgage and mezzanine loans on the Southfield, Mt.
Lebanon and Austin facilities and recognized a gain on
extinguishment of debt of $12,511, net of closing costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We manage the facilities for a fee equal to 5% of gross
revenues. Under certain limited circumstances the venture
partner has the right to terminate the management agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Combined summarized financial information of the unconsolidated
joint ventures accounted for using the equity method as of an
for the three months ended March&nbsp;31 (unaudited)&nbsp;and
years ended December&nbsp;31 are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Statement of Operations
    Data:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,781</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,558</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,701</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,977</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,977</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Expenses:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,200</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,106</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,208</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,047</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">431</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">405</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">601</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">690</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,035</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">505</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">509</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,049</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">522</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">213</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(551</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(415</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,602</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(423</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">168</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,559</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,801</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,906</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,679</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">222</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(243</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(205</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">973</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,298</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-37

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balance Sheet Data:</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,213</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">952</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,017</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">881</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Notes receivable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,739</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,891</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,739</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,739</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">50,397</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,292</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">50,777</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,853</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">309</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">967</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">425</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">65,349</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,444</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">65,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,898</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Liabilities&nbsp;&#151; accounts
    payable and accrued expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,809</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,405</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,467</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,264</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,355</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,355</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,355</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,355</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Members&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,185</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">34,684</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,678</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,279</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities and members&#146;
    equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">65,349</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,444</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">65,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,898</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Members&#146; equity consists of:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Invested capital
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,973</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,973</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,973</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,973</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative net loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(277</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(239</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative distributions
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,771</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,012</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,056</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(660</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Members&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,185</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">34,684</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,678</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,279</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Property, Plant and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property, plant and equipment consist of the following as of:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Land
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">44,051</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">44,062</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">136,266</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">467,172</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">463,490</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,232,117</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Furniture and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">41,596</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">40,083</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,473</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident and operating lease
    intangibles
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,254</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,658</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,933</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">558,073</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">557,293</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,434,789</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated depreciation and
    amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(34,183</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(33,674</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(33,628</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">523,890</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">523,619</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,401,161</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-38

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We exercised our option to purchase the following facilities
pursuant to the terms of the respective operating leases. In
general, the purchase price (before closing costs) was funded,
in part, by the assumption of a non-recourse first mortgage.
Concurrent with the purchase, the operating lease for each of
the facilities was terminated and the lease security deposit was
returned to us and simultaneously paid to the lessor as a
portion of the purchase price. A summary of purchases completed
during 2003 are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Purchase</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Debt</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Lease Security</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B><FONT face="helvetica,arial">2003 Facilities Purchased</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Date</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Price</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Assumed</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Deposit</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Gables at Farmington
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">April 22</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,128</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,525</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,603</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Kenwood of Lake View
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">April 22</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">21,807</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,225</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,582</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Atrium
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">April 22</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">45,022</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,022</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Chatfield
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">July 1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,232</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,368</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,864</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Berkshire of Castleton
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">September&nbsp; 30</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,462</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,914</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,548</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Brookdale Place of San&nbsp;Marcos
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">September&nbsp; 30</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25,704</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,054</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,650</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Hallmark
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">September&nbsp; 30</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">96,324</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">62,388</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,936</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Springs of East Mesa
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">September&nbsp; 30</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,319</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,376</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,943</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Gables at Brighton
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">September&nbsp; 30</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,178</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,355</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,823</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Park Place
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">September&nbsp; 30</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,561</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,765</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,796</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Ponce de Leon
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">November 1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,202</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,611</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,591</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Devonshire of Hoffman Estates
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">December 19</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39,331</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,250</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25,081</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Classic at West Palm Beach
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">December&nbsp;31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,794</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,948</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,846</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Brendenwood
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">December&nbsp;31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">21,246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,288</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,958</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">River Bay Club(1)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">December&nbsp;31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">45,118</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39,574</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,544</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total facilities purchased
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">431,428</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">274,641</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">156,787</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    River Bay Club debt assumed includes $13,222 of debt due
    February 2004 and secured by a restricted cash deposit of
    $14,023 at December&nbsp;31, 2003. On February&nbsp;2, 2004, the
    lease security deposit was returned to the Company and the
    corresponding debt was repaid.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Assets Sold or Held for Sale</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Nine facilities and five land parcels were designated as assets
held for sale effective December&nbsp;1, 2003. In the period
from December&nbsp;1, 2003 to December&nbsp;31, 2003 nine
facilities were sold or disposed of and approximately
$28.6&nbsp;million in debt was repaid or was assumed by the
buyer. In the year ending December&nbsp;31, 2004, thirteen
facilities were sold or disposed, two land parcels were sold and
approximately $6.7&nbsp;million in debt was repaid. As of
December&nbsp;31, 2004, five facilities are held for sale. We
have presented separately as discontinued operations in all
periods, the results of operations for all consolidated assets
disposed of or held for sale through March&nbsp;31, 2005.
</DIV>

<P align="center" style="font-size: 10pt;">F-39

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table represents operating information included in
the loss on discontinued operations in the consolidated
statements of operations for the three months ended
March&nbsp;31 and the years ended December&nbsp;31 are as
follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenues
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">515</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,996</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,265</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,669</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">717</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,300</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,533</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,059</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(202</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(304</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,268</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(390</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on debt extinguishment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(580</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain (loss) on sale or disposal of
    residences
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,063</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">65</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(102</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Benefit for income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">547</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">481</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">429</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(820</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(722</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(643</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are a number of factors that may affect the timing of a
sale and the sale price that will ultimately be achieved for
these facilities, including, among other things, the following:
potential increased competition from any other facilities in the
area, the relative attractiveness of the facilities for
investment purposes, interest rates, the actual operations of
the residence, and the ability to retain existing residents and
attract new residents. As a result, there is no assurance as to
what price will ultimately be obtained upon a sale of these
facilities or the timing of such a sale. The estimated fair
value of the assets held for sale is reflected in current assets
and the outstanding debt related to the assets held for sale is
reflected in current liabilities on the consolidated balance
sheets.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Other Assets</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other assets are comprised of deferred financing costs, net,
employee loan receivable (note&nbsp;13), and other.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Debt</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Line of Credit Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At March&nbsp;31, 2005, and December&nbsp;31, 2004 and 2003, we
had an available unsecured line of credit of $28,600 and $18,600
and $41,640 ($8,600, $8,600 and $7,524 is only available for
certain letters of credit), and $10,000, $0 and $15,400 were
outstanding, respectively. Borrowings under the line of credit
accrue interest at the prime rate plus 1.00% (prime rate 5.25%,
5.25% and 4.00% at March&nbsp;31, 2005 and December&nbsp;31,
2004 and 2003, respectively). We must pay a quarterly fee of
1/8%&nbsp;per annum on the unused amounts under the lines of
credit during the quarter. Pursuant to the terms of the credit
agreement, we must maintain certain debt service coverage
ratios. The line of credit matures on May&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of March&nbsp;31, 2005 and December&nbsp;31, 2004 and 2003,
we have additional outstanding letters of credit totaling $3,292
with a second financial institution to secure the Company&#146;s
obligations for our self-insured retention risk under its
various insurance policies. The total amount of letters of
credit outstanding as of March&nbsp;31, 2005 and
December&nbsp;31, 2004 and 2003, of $19,230 and $15,749 and
$7,524 (stated above) includes $3,292 related to the
self-insured retention risk.
</DIV>

<P align="center" style="font-size: 10pt;">F-40

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Long-term Debt, Capital Leases and Financing
Obligations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Long-term debt, capital leases and financing obligations consist
of the following as of March&nbsp;31 and December&nbsp;31:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage notes payable due 2008
    through 2009 weighted average interest at rates of 6.42% in 2004
    (2003 weighted average interest rate 6.88%)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,471</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,578</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">343,481</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgages payable, due from 2005
    through 2037; weighted average interest rate of 8.45% in 2004
    (2003 weighted average interest rate of 6.46%)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75,688</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75,903</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">263,080</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">$150,000 Series&nbsp;A and $32,000
    Series&nbsp;B&nbsp;notes payable, secured by development
    properties, bearing interest at LIBOR plus 3.05% to LIBOR plus
    5.60%, respectively, payable in monthly installments of interest
    only, with a maturity date of April&nbsp;1, 2008 and 50%
    guaranteed by the Company(a)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">182,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Construction and mezzanine loans
    payable secured by development properties consolidated pursuant
    to FIN&nbsp;46R bearing interest at rates ranging from LIBOR
    plus 2.30% to LIBOR plus 3.50% (floor of 5.50%) and
    15.65%-19.50%, respectively, payable in monthly installments and
    $153,567 guaranteed by BLC(d)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">179,248</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">191,542</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loan payable interest only monthly
    at prime plus 1% (prime 5.25% at March&nbsp;31, 2005) and
    principal payable quarterly of $500 commencing July&nbsp;1, 2005
    and maturing March&nbsp;31, 2007
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capital and financing lease
    obligation payable through 2020; weighted average interest rate
    of 11.83% in 2004 (2003 weighted average interest rate of 11.48%)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,284</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,284</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,967</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mezzanine loan payable to Brookdale
    Senior Housing, LLC joint venture with respect to The Heritage
    at Gaines Ranch facility, payable to the extent of all available
    cash flow (as defined)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,739</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,739</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,739</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Serial and term revenue bonds
    maturing serially from 2003 through 2013; interest rate of 7.36%
    in 2004 (2003 interest rate of 7.34%)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,865</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,865</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,144</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Notes payable to former joint
    venture partners through 2008; interest rates of 9.0%
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,228</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,420</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,048</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loan payable with respect to River
    Bay Club, payable quarterly interest only and repaid February
    2004 from cash and investments&nbsp;&#151; restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,222</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-41

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Variable rate tax-exempt and
    taxable bonds secured facilities, payable interest only (rates
    ranging from 1.12%-1.20% at December&nbsp;31, 2003, until
    maturity on December&nbsp;15, 2019-2029(b),(c)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">94,290</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Notes payable from shareholders of
    FBA bearing interest at 15%&nbsp;per annum plus contingent
    interest (as defined), secured by and repaid from proceeds from
    sale of investments by GFB-AS Investors, LLC
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,553</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Promissory note payable to a bank
    bearing interest at 6.31% payable interest only and repaid
    January 2004
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,270</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">383,275</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">371,037</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,029,336</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Less current portion and debt on
    assets held for sale (2003)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,606</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,888</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">133,892</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total long-term debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">378,669</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">367,149</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">895,444</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    (a)</TD>
    <TD></TD>
    <TD valign="top">
    Annually the Series&nbsp;A and B notes payable can be resized,
    as defined, to convert the Series&nbsp;B note to a Series&nbsp;A
    note. On the first anniversary date Series&nbsp;A interest rate
    is LIBOR plus 3.10% and Series&nbsp;B is LIBOR plus 6.60%
    increasing 1.00% annually thereafter. The notes can also be
    extended to two one-year terms based on meeting certain
    covenants.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (b)</TD>
    <TD></TD>
    <TD valign="top">
    The tax-exempt Qualified Residential Rental Bonds (the
    &#147;Bonds&#148;) require a portion of the units at the
    facilities financed with the proceeds generated from the sale of
    the Bonds to be leased to qualified individuals based on income
    levels specified by the U.S.&nbsp;Government. The interest rate
    payable on the Bonds is adjusted weekly based upon the
    remarketing rate for the Bonds. The credit enhancement for the
    Bonds is provided by the Federal Home Loan Mortgage Corporation.
    The annual interest rate on the Bonds cannot exceed 15%. These
    obligations were assumed by Provident (note&nbsp;11).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (c)</TD>
    <TD></TD>
    <TD valign="top">
    We guaranteed the reimbursement obligation to the credit
    enhancer on $65,000 of the tax-exempt debt, which guaranty is
    limited to $4,000 and terminates when the amount in the
    principal reserve fund equals or exceeds $4,000 (principal
    reserve fund balance of $2,635 at December&nbsp;31, 2003,
    included in cash and investments&nbsp;&#151; restricted in the
    accompanying consolidated balance sheet). These obligations were
    assumed by Provident (note&nbsp;11).</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (d)</TD>
    <TD></TD>
    <TD valign="top">
    Includes first mortgage and mezzanine loan payable to a
    shareholder of FBA with a balance, including accrued long-term
    interest, of $51,238 and $14,458, respectively, at
    December&nbsp;31, 2004 originally due December&nbsp;31, 2005.
    The first mortgage loan is guaranteed by BLC and bears interest
    at LIBOR plus 2.70% payable interest only monthly and net cash
    flow (as defined). The mezzanine loan accrues interest at 19.5%
    payable at maturity.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In connection with the Provident transaction the Company posted
    $4,000 in an interest bearing account as collateral for one
    construction loan maturing March 2005. Upon completion of the
    refinancing the collateral was released.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    (e)</TD>
    <TD></TD>
    <TD valign="top">
    Certain of our debt agreements require us to maintain financial
    ratios, including debt service coverage and occupancy ratios and
    are guaranteed by us.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-42

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The annual aggregate scheduled maturities of long-term debt
obligations outstanding as of December&nbsp;31, 2004 are as
follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Year Ending December&nbsp;31,</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,888</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2006
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,320</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2007
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,437</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2008
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">193,087</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2009
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,915</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Thereafter
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,390</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">371,037</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Substantially all the property, plant and equipment has been
pledged as collateral for the outstanding debt, capital lease
and financing obligations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Derivative Financial Instruments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We recorded the following interest rate swaps and
forward-starting interest rate swaps when we consolidated the
developmental facilities in accordance with FIN&nbsp;46R on
December&nbsp;31, 2003. Upon consolidation, we recorded a
cumulative effect of a change in accounting principle resulting
in a loss of $13,208, net of income taxes of $8,095, which was
the fair value of the swaps on the date of consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Interest Rate Swaps</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have one interest rate swap agreement that converts $37,320
of its floating-rate construction debt to a fixed-rate basis of
5.19% through maturity on April&nbsp;1, 2005. The market value
of the swap at December&nbsp;31, 2004 and 2003 was a liability
of $246 and $1,446, respectively, which is included in other
current liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Forward Interest Rate Swaps</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has four 10-year forward interest rate swaps to fix
$97,300 of future mortgage debt at 7.03%-7.325% with a maturity
date of August 2012 to March 2013. In May 2004, the Company
extended the termination dates to June 2006. The terms of the
forward interest rate swaps require the Company to pay a
fixed-interest rate to the counterparties and to receive a
variable rate from the counterparties. The fair value of the
forward interest rate swaps at December&nbsp;31, 2004 and 2003
was a liability of $17,881 and $19,857, respectively. The
forward interest rate swaps are included in other long-term
liabilities at December&nbsp;31, 2004, and other current
($10,387) and long-term liabilities ($9,470) at
December&nbsp;31, 2003. Included in cash and
investments-restricted at December&nbsp;31, 2004 and 2003 are
deposits of $8,004 and $6,565, respectively, to collateralize
our swap obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the year ended December&nbsp;31, 2004, and the three months
ended March&nbsp;31, 2005 and 2004 (unaudited), the fair value
of the interest rate and forward interest rate swaps liability
(increased)&nbsp;decreased by $3,176, $4,062 and ($2,832),
respectively, which is recorded as an adjustment to interest
expense in the accompanying consolidated statements of
operations.
</DIV>

<P align="center" style="font-size: 10pt;">F-43

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;30, 2005, we terminated our existing forward
interest rate swaps and incurred a termination payment of
$15,807, including accrued interest of $1,742, which was funded
by a $10,000 unsecured loan bearing interest payable monthly at
prime plus 1% and principal payable in quarterly installments of
$500 commencing July&nbsp;1, 2005 and maturing March&nbsp;31,
2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2005, we entered into interest rate swaps in the amount
of $252,000 to hedge the floating rate debt and lease payments
under which we pay an average fixed rate of 4.66% and receive
LIBOR from the counterparty. The interest rate swaps are
comprised of $215,000 seven-year swap at an average fixed rate
of 4.71% and $37,000 three-year swap at a fixed rate of 4.40% .
In connection with the swaps we posted $2,250 as collateral and
are required to post additional collateral based on changes in
the fair value of the swaps. The swaps are treated as cash flow
hedges with unrealized gains or losses recorded as accumulated
other comprehensive income. We are exposed to credit loss in the
event of non-performance by the counterparty to an interest rate
swap agreement, however; we do not anticipate non-performance by
the counterparty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Interest Rate Caps</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We had interest rate caps with a notional amount of $62,291 and
$15,040 and a strike price of 6.35% and 6.58% that expired at
June&nbsp;1, 2009 and December&nbsp;1, 2004. The interest rate
caps were assigned to Provident (see note&nbsp;11).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Accrued Expenses</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accrued expenses comprise of the following:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued salaries and wages
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,866</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,521</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,547</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued interest
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,431</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,622</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,649</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued insurance reserves
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,276</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,795</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,844</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued real estate taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,599</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,877</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,235</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued income taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">620</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,173</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">117</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued vacation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,389</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,406</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,435</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued professional fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,433</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,936</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,675</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued lease payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,242</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,614</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,248</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,908</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,389</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,396</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">68,764</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">77,333</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">73,146</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-44

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>10.</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The (provision)&nbsp;benefit for income taxes is comprised of
the following as of March&nbsp;31 and December&nbsp;31:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Federal:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,032</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,223</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,895</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">340</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,904</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,223</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,927</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">340</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,904</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">State:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,368</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(127</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(44</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">40</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(335</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">77</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,703</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(50</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,762</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,260</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,630</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A reconciliation of the (provision)&nbsp;benefit for income
taxes to the amount computed at the U.S.&nbsp;Federal statutory
rate of 34%:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Tax (provision)&nbsp;benefit at
    U.S.&nbsp;statutory rate
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,494</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,528</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,721</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,241</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,931</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Variable interest entities
    (VIE&#146;s)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,337</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,463</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,342</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">State taxes, net of federal income
    tax
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(113</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,444</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">73</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,163</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(164</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,565</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,024</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(572</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,260</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,630</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in note&nbsp;2, we adopted FIN&nbsp;46R as of
December&nbsp;31, 2003 and consolidated the VIE&#146;s for
financial reporting purposes. For Federal and state income tax
purposes, we are not the legal owner of the entities and are not
entitled to receive tax benefits generated from the losses
associated with these VIE&#146;s. The Company did obtain legal
title to certain facilities on March&nbsp;1, 2005.
</DIV>

<P align="center" style="font-size: 10pt;">F-45

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Significant components of our deferred tax assets and
liabilities are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred income tax assets:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating loss carryforwards
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">38,085</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">34,106</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">80,301</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,185</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,171</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">594</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,566</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,650</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,701</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,421</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,829</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Fair value of swaps (a cumulative
    effect of a change in accounting principal in 2003, note&nbsp;8)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,428</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,833</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,095</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred gain on sale leaseback
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39,945</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">41,186</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,077</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,332</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">716</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total gross deferred income tax
    asset
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110,707</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110,107</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">105,407</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Valuation allowance
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(88,917</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(89,282</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(46,276</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net deferred income tax assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">21,790</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,825</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">59,131</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred income tax liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property, plant and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,399</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,352</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(99,873</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Investment in Brookdale Senior
    Housing, LLC
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,345</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,402</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,802</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,071</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,896</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total gross deferred income tax
    liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,790</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,825</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(107,571</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net deferred income tax liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(48,440</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As described in note&nbsp;11, in 2004 we sold the stock of BLC
to Provident who assumed BLC&#146;s income tax positions
resulting in a non-taxable gain for income tax purposes. For
financial reporting purposes we recorded a deferred tax asset of
$41,186 from the gain. Included in the deferred gain on sale
leaseback is a net deferred tax liability of $51,669 assumed by
Provident comprised primarily of deferred tax liabilities
related to the stock sale, net of operating loss carryforwards
and related valuation allowance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2004, BLC has net operating loss
carryforwards for Federal and state income tax purposes of
approximately $13,611 and $19,331, respectively, which are
available to offset future taxable income, if any, through 2024.
We have recorded a valuation allowance due to uncertainties
regarding our ability to utilize these losses in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with fresh start accounting Alterra&#146;s assets
and liabilities were recorded at their respective fair market
values. Deferred tax assets and liabilities were recognized for
the tax effects of the difference between the fair values and
the tax bases of Alterra&#146;s assets and liabilities. In
addition, deferred tax assets were recognized for the future use
of net operating losses. The valuation allowance established to
reduce deferred tax assets as of December&nbsp;31, 2004 and 2003
was $28.4&nbsp;million and $32.7&nbsp;million, respectively. The
reduction in this valuation allowance relating to net deferred
tax items existing at the Effective Date will increase
additional paid in capital. At December&nbsp;31, 2004, Alterra
increased additional paid-in capital by $4.8&nbsp;million as a
result of a reduction in valuation allowance related to net
deferred tax assets not benefited under fresh-start accounting,
but realized in the year ended December&nbsp;31, 2004.
</DIV>

<P align="center" style="font-size: 10pt;">F-46

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reorganization of Alterra constituted an ownership change
under section&nbsp;382 of the Internal Revenue Code. The use of
any of its net operating losses generated prior to the ownership
change that are not reduced pursuant to the provisions discussed
above will be subject to an overall annual limitation of
approximately $3.6&nbsp;million. Further utilization of net
operating losses can be achieved by increasing the net operating
loss limitation (under section&nbsp;382) for recognized built-in
gains. During 2004, Alterra increased the section&nbsp;382
limitation by $63.3&nbsp;million as a result of recognizing
built-in gains. Alterra has provided a valuation allowance for
the entire amount of the net operating loss remaining after the
reduction above, as well as its other net deferred tax assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra has approximately $67.6&nbsp;million of net operating
losses subject to the section&nbsp;382 limitation and
$6.2&nbsp;million of regular net operating loss carryforwards at
December&nbsp;31, 2004. Any unused net operating loss
carryforwards will expire commencing in years 2021 through 2023.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A reconciliation to the combined balance sheet is as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred income tax liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(51,365</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current deferred income tax asset
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,925</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net deferred income tax liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(48,440</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>11.</B></TD>
    <TD>
    <B>Facility Operating Leases</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have entered into sale leaseback and lease agreements with
certain real estate investment trusts (REITs). Under these
agreements we either sell facilities to the REIT or enter into a
long-term lease agreement for such facilities. The lease terms
vary from 10 to 20&nbsp;years and include renewal options
ranging from 5 to 30&nbsp;years. We are responsible for all
operating costs, including repairs, property taxes and
insurance. The substantial majority of our lease arrangements
are structured as master leases. Under a master lease, we lease
numerous facilities through an indivisible lease. We typically
guarantee our performance and the lease payments under the
master lease and are subject to net worth, minimum capital
expenditure requirements per facility per annum and minimum
lease coverage ratios. Failure to comply with these covenants
could result in an event of default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Ventas Portfolio</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the first quarter of 2004, the limited partnerships that
owned 14 GC Facilities (1,994&nbsp;units), in which GFB had
general and limited partnership interests, sold the facilities
to Ventas, Inc. (&#147;Ventas&#148;) and we entered into an
operating lease agreement to lease the facilities from Ventas
for an initial aggregate annual lease rate of $10,598 (the
&#147;Ventas Lease&#148;). The Ventas Lease has an initial term
of 15&nbsp;years with our right to extend for up to two 10-year
periods and is guaranteed by BLC. We also have the right to
purchase the facilities in year 15 at the greater of the fair
market value or a stated minimum purchase price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On May&nbsp;13, 2004, we amended the operating lease agreement
with Ventas to include a 221-unit facility with an initial
annual lease rate of $3,549 except we do not have a purchase
option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On October&nbsp;19, 2004, the Ventas Lease was amended to
provide for: (i)&nbsp;annual escalations of the greater of 2.0%
(increased from 1.5%) or 75% of the CPI increase,
(ii)&nbsp;purchase option in year
</DIV>

<P align="center" style="font-size: 10pt;">F-47

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
15 (from year 10)&nbsp;of the lease and (iii)&nbsp;a security
deposit of $7,230 (increased from $1,205) which is in the form
of letters of credit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Provident Portfolio</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;18, 2004, FBA entered an agreement to sell the
stock of BLC to Provident Senior Living Trust
(&#147;Provident&#148;). The sale was contingent upon BLC
obtaining certain third party consents, which were obtained
prior to the closing of the sale on October&nbsp;19, 2004. Prior
to the sale, BLC distributed all the assets and liabilities,
except for the real estate of 21 owned facilities
(4,474&nbsp;units) and related property debt, certain other
mezzanine loans and the unsecured line of credit, to a new
entity representing the continuing BLC entity. In connection
with the stock sale, Provident assumed BLC&#146;s income tax
positions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October and December 2004, Alterra sold 38 (1,732&nbsp;beds)
and nine facilities (613&nbsp;beds), respectively to Provident.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The aggregate sales price was $982,798 including transaction
costs, assumed debt and other liabilities. Simultaneously with
the closing, we entered into an operating lease agreements to
lease back the facilities, resulting in the gain on the sale of
$130,776 being deferred and amortized over the initial lease
term. In addition, we recognized a gain of $1,051 on the
assumption of the mezzanine loans. A summary of the deferred
gain is as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Sales price
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">982,798</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net carrying value
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(856,339</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Transaction costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,663</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Goodwill write-off
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(35,689</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net deferred tax liability assumed
    by Provident (note&nbsp;10)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">51,669</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred gain
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">130,776</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from the sale were
    distributed as follows:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Sales price
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">982,798</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assumption of debt and accrued
    interest
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(461,248</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assumption of mezzanine loans and
    unsecured line of credit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(114,202</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Transaction costs, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,494</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease security deposit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(20,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Dividend to shareholders
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(254,577</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net working capital retained
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">122,277</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
BLC&#146;s operating lease has an initial term ending on
December&nbsp;31, 2019, with our right to extend for up to two
10-year periods and is guaranteed by BLC. The initial annual
lease rate is approximately $60,130 and can be adjusted for
changes in interest rates on $110,771 of variable rate mortgages
assumed by the lessor and increases annually starting on
January&nbsp;1, 2006 by the lesser of 3% or four times the
percentage increase in CPI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra&#146;s operating lease has an initial term ending on
October&nbsp;31, 2019 with our right to extend for two five-year
periods and is guaranteed by Alterra. The initial annual lease
is $23,143 and increases annually by the lesser of 2.5% or four
times the percentage increase in CPI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the transaction, FBA made a $20,000 lease
security deposit in an interest bearing account at the time of
closing and Alterra has agreed to deposit 50% of excess cash flow
</DIV>

<P align="center" style="font-size: 10pt;">F-48

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
until the security deposit is $10,000. We agreed to spend a
minimum of $400 to $450&nbsp;per unit per year on capital
improvements on the BLC facilities of which Provident will
reduce BLC&#146;s security deposit by that same amount up to
$600&nbsp;per unit per year.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>12.</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have two operating lease agreements for 30,314 and
44,222&nbsp;square feet of office space that extends through
2010 and 2009, respectively. The leases require the payment of
base rent which escalates annually, plus operating expenses (as
defined). We incurred rent expense of $2,449, $1,213 and $1,103
for the years ended December&nbsp;31, 2004, 2003 and 2002,
respectively, and $370 and $603 for the three months ended
March&nbsp;31, 2005 and 2004, respectively, under the office
leases which are included in general and administrative expense
in the accompanying combined statements of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The aggregate amounts of all future minimum operating lease
payments, including facilities and office leases, as of
December&nbsp;31, 2004, are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Capital/</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Financing</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Operating</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ending December&nbsp;31,</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Leases</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Leases</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">169,255</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">177,199</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2006
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">173,952</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">181,896</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2007
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">178,088</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">186,032</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2008
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">180,703</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">188,647</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2009
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,944</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">183,763</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">191,707</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Thereafter
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">67,894</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,018,523</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,086,417</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total minimum lease payments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">107,614</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,904,284</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,011,898</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Less amount representing interest
    (11.83%)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(41,331</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(41,331</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">66,283</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,904,284</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,970,567</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Litigation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are involved in various lawsuits and are subject to various
claims arising in the normal course of business. In the opinion
of management, although the outcomes of these suits and claims
are uncertain, in the aggregate, they should not have a material
adverse effect on our business, financial condition and results
of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>13.</B></TD>
    <TD>
    <B>Insurance, Benefits and Employee Loan</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Insurance</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We obtain various insurance coverages from commercial carriers
at stated amounts as defined in the applicable policy. Losses
related to deductible amounts are accrued based on the
Company&#146;s estimate of expected losses plus incurred but not
reported claims. As of March&nbsp;31, 2005 and December&nbsp;31,
2004 and 2003, we have accrued $35,081 and $35,355 and $32,091,
respectively, for our self-insured programs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have secured our self-insured retention risk under our
workers&#146; compensation and general liability and
professional liability programs with cash and letters of credit
aggregating $17,118 and
</DIV>

<P align="center" style="font-size: 10pt;">F-49

</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>BROOKDALE/ ALTERRA</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
$3,292 and $17,918, $16,247 and $3,292 as of March&nbsp;31, 2005
and 2004 and December&nbsp;31, 2004, 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Employee Benefit Plan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain a 401(k) Retirement Savings Plan for all employees
that meet minimum employment criteria. The plan provides that
the participants may defer eligible compensation on a pre-tax
basis subject to certain Internal Revenue Service maximum
amounts. We make matching contributions in amounts equal to 25%
of the employee&#146;s contribution to the plan. Employees are
always 100% vested in their own contributions and vest in our
contributions over five years. We made contributions to such
plans in the amount of $879, $472 and $323 for the years ended
December&nbsp;31, 2004, 2003 and 2002, respectively, and $107
and $94 for the three months ended March&nbsp;31, 2005 and 2004,
respectively. Such amounts are included in facility operating
and general and administrative expense in the accompanying
combined statements of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Employee Loan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In October 2000, pursuant to the terms of his employment
agreement, BLC loaned approximately $2.0&nbsp;million to our
Chief Executive Officer. In exchange, BLC received a ten-year,
secured, non-recourse promissory note, which note bears interest
at a rate of 6.09%&nbsp;per annum, of which 2.0% is payable in
cash and of which the remainder accrues and is due at maturity
on October&nbsp;2, 2010. The note is secured by the Chief
Executive Officer&#146;s membership interests in FBA.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>14.</B></TD>
    <TD>
    <B>Subsequent Events</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April 6 and&nbsp;14, 2005, we entered into agreements with
affiliates of FIG to manage eight continuing care retirement
communities for a fee of 4-6% of gross revenues and 3% of net
entrance fees. Two facilities are held for sale, one of which
was sold July&nbsp;1, 2005. We were retained as the facility
manager.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June 21, 2005 and July&nbsp;22, 2005, we entered into
agreements with affiliates of FIG to manage nine facilities for
a fee of 4-6% of gross revenues (unaudited).
</DIV>

<P align="center" style="font-size: 10pt;">F-50

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='317'></A>
</DIV>

<!-- link1 "SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS" -->

<DIV align="center" style="font-size: 10pt;">
<B>SCHEDULE&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>VALUATION AND QUALIFYING ACCOUNTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Additions</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Balance at</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Charged to</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Charged</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Balance at</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Beginning of</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">costs and</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">to other</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Combination</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">End of</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Period</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">expenses</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">accounts</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">of Alterra</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Deductions</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Period</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Allowance for Doubtful Accounts
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Year ended December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">317</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">344</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">361</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">300</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Year ended December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">300</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">560</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,374</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">588</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,646</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Year ended December&nbsp;31, 2004
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,646</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">831</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,614</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,863</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred Tax Valuation Account
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Year ended December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,573</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,573</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Year ended December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,573</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">32,703</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,276</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Year ended December&nbsp;31, 2004
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,276</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,006</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">89,282</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying report of independent registered public
accounting firm.
</DIV>

<P align="center" style="font-size: 10pt;">F-51

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='320'></A>
</DIV>

<!-- link1 "REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Stockholder of Brookdale Living Communities, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying combined statements of
financial position of the properties comprising the Fortress
CCRC Portfolio (the &#147;Properties&#148;) as of
December&nbsp;31, 2004 and 2003, and the related combined
statements of activities and changes in net deficit, and cash
flows for each of the three years in the period ended
December&nbsp;31, 2004. These financial statements are the
responsibility of the Properties&#146; management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Properties&#146; internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Properties&#146; internal control over financial reporting.
Accordingly we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined financial
position of the Properties at December&nbsp;31, 2004 and 2003,
and the combined results of their operations and their cash
flows for each of the three years in the period ended
December&nbsp;31, 2004, in conformity with U.S.&nbsp;generally
accepted accounting principles.
</DIV>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="center">
    /s/ Ernst&nbsp;&#38; Young LLP</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Chicago, Illinois
</DIV>

<DIV align="left" style="font-size: 10pt;">
July&nbsp;22, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-52

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='321'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF FINANCIAL POSITION" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED STATEMENTS OF FINANCIAL POSITION</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="14" align="left" valign="top">
    <B><FONT face="helvetica,arial">Assets</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current assets:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,213</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,873</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,962</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,570</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,254</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,448</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Marketable securities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,024</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,309</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,816</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">434</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">651</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">455</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,241</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25,087</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,681</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">225,814</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">225,143</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">230,855</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated depreciation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(75,995</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(74,065</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(66,586</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">149,819</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">151,078</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">164,269</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Bond proceeds held by trustee
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,276</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,673</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,685</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term investments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,499</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,499</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,151</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Goodwill, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,341</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,363</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,451</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred financing costs, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,706</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,778</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,068</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">530</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">539</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">572</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">181,412</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">193,017</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">210,877</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="14">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="14" align="left" valign="top">
    <B><FONT face="helvetica,arial">Liabilities and Net Asset
    (Deficit)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Bonds payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">183,079</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">183,053</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">182,946</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued interest payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,611</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,624</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,538</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Trade accounts payable and accrued
    expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,298</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,391</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,737</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Due to parent, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">43,863</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,302</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,039</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">237,851</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">200,370</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">201,260</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Unearned entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,786</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,197</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,013</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,758</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,759</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,639</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">269,395</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">232,326</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">237,912</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Net asset (deficit)</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Unrestricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(91,217</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(42,573</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(30,008</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Temporarily restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">736</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">766</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">823</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Permanently restricted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,498</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,498</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,150</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total net deficit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(87,983</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(39,309</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(27,035</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities and net asset
    (deficit)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">181,412</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">193,017</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">210,877</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-53

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='322'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF ACTIVITIES AND CHANGES IN NET DEFICIT" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED STATEMENTS OF ACTIVITIES AND CHANGES IN NET
DEFICIT</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Revenue</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,706</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,992</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">80,776</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75,856</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">71,467</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">560</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">612</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,430</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,841</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,093</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,266</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,604</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,206</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">78,697</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">74,560</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Expenses</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,574</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,562</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">68,079</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">64,746</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">63,051</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees&nbsp;&#151;
    affiliate
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">868</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">842</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,467</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,320</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,187</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,990</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,959</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,885</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,753</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,550</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Impairment of property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,063</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,432</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,363</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88,494</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75,819</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">73,788</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income (loss) from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">834</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,241</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,288</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,878</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">772</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other income (expense):
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Contributions and deferred gifts
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">71</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">604</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,389</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,736</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,383</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">455</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">266</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,590</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,503</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,619</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net unrealized and realized gains
    (losses) on investments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(158</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">150</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">75</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(457</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,643</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain on sale of equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">341</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">90</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,013</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,508</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,329</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,410</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,993</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense&nbsp;&#151;
    affiliate
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(675</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(447</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,090</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,252</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(821</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of deferred financing
    costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(72</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(290</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(298</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(293</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in net assets from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(558</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">233</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,943</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,959</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,886</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net transfers (to)&nbsp;from NBA
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(48,116</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(797</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,331</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,590</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(305</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in net deficit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(48,674</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(564</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,274</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,549</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,191</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net deficit at beginning of period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(39,309</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(27,035</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(27,035</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(19,486</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,295</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net deficit at end of period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(87,983</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(27,599</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(39,309</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(27,035</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(19,486</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-54

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='323'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF CASH FLOWS" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED STATEMENTS OF CASH FLOWS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Operating activities</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Change in net assets from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(558</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">233</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,943</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,959</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,886</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjustments to reconcile change in
    net assets from operations to net cash provided by (used in)
    operating activities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(560</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(612</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,430</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,841</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,093</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,990</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,959</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,885</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,753</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,550</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Impairment of property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,063</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net (gain)&nbsp;loss on investment
    activity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">158</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(150</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">457</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,643</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of deferred financing
    costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">72</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">73</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">290</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">298</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">293</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of debt discounts
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">107</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">110</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">105</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain on sale of property and
    equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(341</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(90</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Changes in operating assets and
    liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(316</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(362</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(806</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(638</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(86</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and other assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">217</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,810</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">332</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">201</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(31</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued interest payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">987</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">770</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,086</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">171</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts payable and accrued
    expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">907</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,004</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">654</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,315</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,496</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">121</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">120</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">601</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(161</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash provided by (used in)
    operating activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,931</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,267</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,788</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,403</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Investing activities</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net change in bond proceeds held by
    trustee
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">397</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,054</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,012</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,840</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(575</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net proceeds from sale (purchase
    of) marketable securities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,127</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,926</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,234</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,859</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Additions to property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(709</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(552</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,669</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,540</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,816</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from sale of property and
    equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">362</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">123</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash provided by (used in)
    investing activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,815</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,428</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,577</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,670</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,127</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Financing activities</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Repayment of bonds payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,844</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,682</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net transfers to NBA
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(48,116</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(797</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,331</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,590</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(305</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net advances from (to) parent
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,561</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,613</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,737</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,838</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,964</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Payment of financing costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net additions to (refunds of)
    entrance fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">149</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,381</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,386</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">738</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,585</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash provided by (used in)
    financing activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,406</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,791</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,454</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,534</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,462</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-55

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMBINED STATEMENTS OF CASH
FLOWS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net increase (decrease) in cash and
    cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(660</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(96</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,911</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(267</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">302</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents at
    beginning of period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,873</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,962</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,962</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,229</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,927</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents at end of
    period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,213</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,866</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,873</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,962</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,229</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Supplemental disclosure of cash
    flow information</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest paid to third parties
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,339</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,136</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,381</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,772</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-56

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='324'></A>
</DIV>

<!-- link1 "NOTES TO COMBINED FINANCIAL STATEMENTS" -->

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Description of Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements present the financial position
and the results of operations related only to eight continuing
care retirement communities owned and operated by The National
Benevolent Association of the Christian Church (Disciples of
Christ) (the &#147;NBA&#148;). In April 2005, Fortress CCRC
Acquisition LLC (&#147;Fortress&#148;) purchased the property
and equipment and accounts receivable of eight senior living
facilities from NBA for approximately $179,200 and assumed the
liabilities associated with entrance fees related to the
properties. No other assets were purchased and no other
liabilities were assumed. All eight facilities are included in
the combined financial statements for the periods presented. For
purposes of the combined financial statements, the facilities
are referred to as the &#147;Fortress CCRC Properties.&#148; The
Fortress CCRC Properties are located in various cities
throughout the United States and consist of the following:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT face="helvetica,arial">Facilities</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Location</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total Units</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cypress Village
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Jacksonville, FL
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">523</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Robin Run Village
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Indianapolis, IN
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">283</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Village at Skyline
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Colorado Springs, CO
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">503</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Ramsey Home
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Des Moines, IA
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">139</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Patriot Heights
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">San&nbsp;Antonio, TX
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">232</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Foxwood Springs Living Center
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Raymore, MO
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">311</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Heritage Crossing
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Edmond, OK
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">233</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Heatherwood Village
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    <FONT face="helvetica,arial">Newton, KS
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">189</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,413</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Four of the above facilities have an aggregate of
825&nbsp;single family homes at March&nbsp;31, 2005 that are
independently owned by the residents of the homes. The
Fortress&nbsp;CCRC Properties are responsible for maintenance of
those homes for which they receive monthly service fees.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Bankruptcy Filing</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On or about December&nbsp;1, 2003, the NBA failed to make
scheduled payments with respect to the loans securing certain of
the fixed rate bond issues, including bonds related to the
Fortress CCRC Properties, and further failed to make certain
payments due to a financial institution, pursuant to which the
letters of credit that supported the variable rate bonds were
issued, including bonds related to the Fortress CCRC Properties.
In addition, in September 2003, the NBA failed to repay certain
loans and other financial obligations when they became due. As a
result of these events, various lenders declared certain events
of default under the respective documents evidencing and/or
governing such bonds, loans, and other obligations and filed
certain lawsuits against the NBA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;16, 2004 (the &#147;Petition Date&#148;), the
NBA and certain of its affiliates (including the operations of
the Fortress CCRC Properties, collectively, referred to herein
as a &#147;debtor-in-possession&#148;) filed voluntary petitions
under Chapter&nbsp;11 of Title&nbsp;11 of the United States Code
(the &#147;Bankruptcy Code&#148;) in the United States
Bankruptcy Court Western District of Texas&nbsp;&#151;
San&nbsp;Antonio Division (the &#147;Bankruptcy Court&#148;).
The NBA and each of such entities were debtors-in-possession
under the Bankruptcy Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Bankruptcy Code, neither the NBA nor any of the
debtors-in-possession were permitted to make principal,
interest, or other debt service payments with respect to the
loans securing the fixed rate bonds or the variable rate bonds
or with respect to other reimbursement obligations.
</DIV>

<P align="center" style="font-size: 10pt;">F-57

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In conjunction with a mediation process ordered by the
Bankruptcy Court, the NBA, in September 2004, entered into an
agreement pursuant to which it agreed, at the request of its
creditors and was subsequently approved by the Bankruptcy Court,
to sell 11 of its senior living facilities (including the
Fortress&nbsp;CCRC Properties), to Fortress. The sale of 11
properties closed during the period April&nbsp;6, 2005 through
May&nbsp;19, 2005, at which time Fortress sold the three
non-Fortress&nbsp;CCRC Properties to third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;29, 2004, the NBA and its creditors filed a
Joint Disclosure Statement for Joint Plan of Reorganization and
a Joint Plan of Reorganization with the Bankruptcy Court. The
Joint Disclosure Statement was approved by the Bankruptcy Court
on January&nbsp;19, 2005. Since that date, the Plan of
Reorganization has been approved by the creditors, and on
March&nbsp;2, 2005, the Plan of Reorganization was confirmed by
the Bankruptcy Court.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Basis of Presentation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements include the accounts related
to the operations of the Fortress&nbsp;CCRC Properties. All
significant intercompany balances and transactions are
eliminated in combination. The combined financial statements are
presented as if the Fortress&nbsp;CCRC Properties had operated
as one combined entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Fortress&nbsp;CCRC Properties&#146; unaudited combined
financial statements as of March&nbsp;31, 2005 and for the three
months ended March&nbsp;31, 2005 and 2004, have been prepared in
accordance with accounting principles generally accepted in the
United States (&#147;GAAP&#148;) for interim financial
information. Accordingly, they do not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, all normal recurring
accruals considered necessary for a fair presentation have been
included. All amounts included in the footnotes to the combined
financial statement, referring to March&nbsp;31, 2005 and for
the three months ended March&nbsp;31, 2005 and 2004 are
unaudited. Operating results for the three month period ended
March&nbsp;31, 2005 are not necessarily indicative of the
results that may be expected for the year ending
December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The majority of the Fortress&nbsp;CCRC Properties&#146; net
assets are unrestricted. The temporarily restricted net assets
activity was $(30), $(87), $(57), $(61) and $(162) for the three
months ended March&nbsp;31, 2005 and 2004 and for the years
ended December&nbsp;31, 2004, 2003 and 2002, respectively. The
permanently restricted net assets activity was $0, $348, $348,
$92, and $173 for the three months ended March&nbsp;31, 2005 and
2004 and for the years ended December&nbsp;31, 2004, 2003 and
2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Use of Estimates</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of the combined financial statements in
accordance with GAAP requires management to make estimates and
assumptions that affect amounts reported and disclosures of
contingent assets and liabilities in the combined financial
statements and accompanying notes. Actual results could differ
from those estimates and assumptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash Equivalents</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All investments with an original maturity of three months or
less are considered to be cash equivalents. No investments were
purchased by Fortress.
</DIV>

<P align="center" style="font-size: 10pt;">F-58

</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Marketable Securities and Long-Term Investments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Investments in marketable securities are carried at market
value. Realized and unrealized gains and losses are reflected in
the combined statements of activities. These investments are
classified as either marketable securities or long-term
investments in the combined statements of financial position.
These classifications are made to divide those investments held
in conjunction with pooled investment trusts, living trusts,
unitrusts, annuity trusts, and endowment agreements from those
investments classified as available to support current
operations. The marketable securities and long term investments
were not purchased by Fortress.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Property and Equipment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment are carried at cost less accumulated
depreciation. Expenditures for ordinary maintenance and repairs
are expensed to operations as incurred. Renovations and
improvements, which improve and/or extend the useful life of the
asset are capitalized and depreciated over their estimated
useful life, or if the renovations or improvements are made with
respect to facilities subject to an operating lease, over the
shorter of the estimated useful life of the renovations or
improvements, or the term of the operating lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;144 Accounting for the Impairment or
Disposal of Long-Lived Assets and Long-Lived Assets to Be
Disposed, the Fortress&nbsp;CCRC Properties will record
impairment losses on long-lived assets used in operations when
events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be
generated by those assets during the expected hold period are
less than the carrying amounts of those assets. Impairment
losses will be measured as the difference between carrying value
and fair value of assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depreciation is provided on a straight-line basis over the
estimated useful lives of assets, which are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Asset Category</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Estimated Useful Life</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">25&nbsp;-&nbsp;40&nbsp;years</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Furniture and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">3&nbsp;-&nbsp;10&nbsp;years</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Bond Proceeds Held by Trustee</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Fortress&nbsp;CCRC Properties are required to maintain
separate accounts for proceeds of bond financings. These
accounts are comprised of cash, money market accounts, and
government-issued debt securities. Government-issued debt
securities are valued at market and have maturity dates which
approximate the cash needs relative to the respective
construction project or debt service requirement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Goodwill</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Goodwill, in the original amount of $3,500, represents the cost
of assets in excess of the book value of the net assets at the
acquisition date of the properties. Goodwill was amortized at a
rate of approximately $88&nbsp;per year over 40&nbsp;years on a
straight-line basis through 2031. Accumulated amortization was
$1,159, $1,137 and $1,049 at March&nbsp;31, 2005 and
December&nbsp;31, 2004 and 2003, respectively.
</DIV>

<P align="center" style="font-size: 10pt;">F-59

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Deferred Financing Costs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred financing costs are recorded at cost and amortized on a
straight-line basis, which approximates the level yield method,
over the term of the related debt and are included in interest
expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Resident Fee Revenue</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Resident fee revenue is recorded when services are rendered and
consists of fees for basic housing (including maintenance on
owned units), support services and fees associated with
additional services such as personalized health and assisted
living care. These amounts have been classified as long-term
liabilities due to the contingency related to their payment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Unearned Entrance Fees</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unearned entrance fees represent payments received in exchange
for the right to occupy apartments or independent living units.
Many of the contracts associated with these arrangements
stipulate that the residents are entitled to refunds of a
percentage of their entrance fees from reoccupancy proceeds
obtained from the subsequent right to occupy their units. The
refundable portion of an entrance fee is required to be
amortized over the estimated useful life of the facility. The
nonrefundable portion is to be amortized over the estimated
remaining life of the resident. The unamortized refundable
entrance fees have been classified as long-term due to the
contingencies related to the repayment of the fee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Donated Property and Gifts</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Contributions of property and materials are recorded as support
in these combined financial statements at their estimated fair
value at the date of gift. Absent donor stipulations on the use
of these assets, these gifts are recorded as unrestricted
support.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Income Taxes</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The NBA and its operating units are exempt from federal income
tax under the provisions of Section&nbsp;501(c)(3) of the
Internal Revenue Code. Accordingly, these combined statements do
not include a provision for federal income tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Fair Value of Financial Instruments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash and cash equivalents and bond proceeds held by the trustee
are reflected in the accompanying combined balance sheets at
amounts considered by management to reasonably approximate fair
value. As of March&nbsp;31, 2005 and December&nbsp;31, 2004, the
fair value of bonds payable approximates book value based upon
the interest rate determined under the NBA&#146;s approved
bankruptcy plan.
</DIV>

<P align="center" style="font-size: 10pt;">F-60

</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Investments in Marketable Securities</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Investments in marketable securities consisted of the following
at March&nbsp;31, 2005 and December&nbsp;31, 2004 and 2003:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Marketable</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Long-Term</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Securities</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Investments</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total Market Value</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">March&nbsp;31, 2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,024</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,499</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,523</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">December&nbsp;31, 2004
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,309</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,499</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,808</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,816</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,151</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,967</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The majority of the marketable securities are invested in the
Total Return Plan. The objective of the Total Return Plan is to
generate a return on investment through appreciation in market
value and income. Subject to the liquidity requirements of the
Total Return Plan, it is part of the investment policy to have
the assets of such plan invested in debt and equity securities
depending on the economic outlook and/or general market
conditions at that time. Because of extreme market volatility,
the NBA took action to invest the Total Return Plan exclusively
in U.S.&nbsp;Treasury bonds and notes and government agency
securities. At December&nbsp;31, 2004 and 2003, the Total Return
Plan remained predominantly invested in U.S.&nbsp;Treasury bonds
and notes and government agency securities. At December&nbsp;31,
2004, the Total Return Plan portfolio had an average duration of
approximately 1.35&nbsp;years and an average maturity of
approximately 1.69&nbsp;years.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Property and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment consist of the following:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Land
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,745</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,745</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,138</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">200,460</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">200,460</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">206,645</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Furniture and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,216</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,082</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,570</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Construction in progress
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,393</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">856</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">502</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">225,814</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">225,143</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">230,855</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated depreciation and
    amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(75,995</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(74,065</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(66,586</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">149,819</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">151,078</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">164,269</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the sale to Fortress described in
Note&nbsp;1, certain Fortress&nbsp;CCRC Properties (Village at
Skyline, Ramsey Home, Heritage Crossing and Heatherwood Village)
incurred a total impairment charge of $9,063 as of
December&nbsp;31, 2004, based upon the sale proceeds received.
</DIV>

<P align="center" style="font-size: 10pt;">F-61

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Bonds Payable</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Bonds payable consists of the following:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Taxable and tax-exempt bonds
    payable with original terms bearing interest at fixed rates
    ranging from 4.1% to 7.8% payable in semi-annual installments
    and annual principal payments with original maturity dates from
    2022 through 2030
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">137,825</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">137,825</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">137,825</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Taxable and tax-exempt bonds
    payable with original terms bearing interest at floating rates
    determined by the remarketing agent for the bonds, payable in
    monthly installments of principal and interest, as defined in
    the bond agreements, maturity dates from 2022 through 2031
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,605</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,605</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,605</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total bonds payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">184,430</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">184,430</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">184,430</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Unamortized discount
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,351</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,377</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,484</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total bonds payable, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">183,079</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">183,053</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">182,946</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In late 2003, the NBA ceased making debt service payments and on
February&nbsp;16, 2004 filed for bankruptcy protection. Since no
debt service payments were being made, the bonds were in default
and have been classified as current at December&nbsp;31, 2004
and 2003 and March&nbsp;31, 2005. Under the terms of the
bankruptcy plan, the interest rate on all of the above bonds was
fixed at 2.17%&nbsp;per annum, and a new maturity date was set
as of February&nbsp;28, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Included in interest expense is amortization of original issue
discount of $26, $27, $107, $110 and $105 for the three months
ended March&nbsp;31, 2005 and 2004 and for the years ended
December&nbsp;31, 2004, 2003 and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The NBA and certain related entities are jointly and severally
obligated for the repayment of the above bonds. The Bond
Proceeds held by Trustee are pledged to secure repayment of the
related bonds.
</DIV>

<P align="center" style="font-size: 10pt;">F-62

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>FORTRESS CCRC PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO COMBINED FINANCIAL
STATEMENTS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(Dollars in thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Fortress&nbsp;CCRC Properties are managed by the NBA for a
fee based on 4% of adjusted gross expenses, as defined by
management. Fees paid to NBA were $893, $842, $3,548, $3,320,
and $3,187 for the three months ended March&nbsp;31, 2005 and
2004 and for the years ended December&nbsp;31, 2004, 2003, and
2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Due to Parent represents amounts advanced by the NBA to support
the operations of the Fortress&nbsp;CCRC Properties. These
amounts were payable upon demand. Gross due to Parent balances
bear interest at 6%, per annum (represents interest
expense-affiliate). All unpaid interest was added to the due to
Parent balance.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Unearned Entrance Fees</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The activity for unearned entrance fees is as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Beginning balance
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,197</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37,116</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Additions
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">686</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,185</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,212</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(560</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,430</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,841</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Refunds
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(537</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,571</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,474</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Ending balance
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29,786</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,197</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,013</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004, the NBA settled a lawsuit with certain occupants of the
Fortress&nbsp;CCRC Properties related to entrance fees. Under
the terms of the agreement, the NBA was required to refund
approximately $3.7&nbsp;million to these occupants, which has
been reflected in the 2004 refunds in the table above.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Litigation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Fortress&nbsp;CCRC Properties are involved in various
lawsuits and are subject to various claims arising in the normal
course of business. In the opinion of management, although the
outcomes of these suits and claims are uncertain, in the
aggregate, they should not have a material adverse effect on the
Fortress&nbsp;CCRC Properties&#146; business, financial
condition and results of activities.
</DIV>

<P align="center" style="font-size: 10pt;">F-63

</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='326'></A>
</DIV>

<!-- link1 "REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
To the Stockholder of Brookdale Living Communities, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying combined balance sheets of the
properties comprising the Prudential Portfolio (the
&#147;Properties&#148;) as of December&nbsp;31, 2004 and 2003,
and the related combined statements of operations, members&#146;
equity and cash flows for each of the three years in the period
ended December&nbsp;31, 2004. These financial statements are the
responsibility of the Properties&#146; management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Properties&#146; internal control over financial
reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Properties&#146; internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined financial
position of the Properties at December&nbsp;31, 2004 and 2003,
and the combined results of their operations and their cash
flows for each of the three years in the period ended
December&nbsp;31, 2004, in conformity with U.S. generally
accepted accounting principles.
</DIV>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/&nbsp;&nbsp;Ernst&nbsp;&#38; Young LLP</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Chicago, Illinois
</DIV>

<DIV align="left" style="font-size: 10pt;">
June&nbsp;7, 2005
</DIV>

<P align="center" style="font-size: 10pt;">F-64

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRUDENTIAL PORTFOLIO</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='327'></A>
</DIV>

<!-- link1 "COMBINED BALANCE SHEETS" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED BALANCE SHEETS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="14" align="left" valign="top">
    <B><FONT face="helvetica,arial">Assets</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current assets:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,817</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,571</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,762</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Restricted cash
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">700</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">632</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">633</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">199</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">207</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">772</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">560</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">221</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,476</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,962</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,823</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">161,243</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">161,159</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">159,993</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated depreciation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(23,078</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,924</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17,121</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">138,165</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">139,235</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,872</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred financing costs, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">340</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">385</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">655</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred rent receivable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">545</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">534</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">468</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,526</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">143,116</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">146,818</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="14">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="14" align="left" valign="top">
    <B><FONT face="helvetica,arial">Liabilities and Members&#146;
    Equity</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current portion of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">71,081</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">64,819</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,032</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Trade accounts payable and accrued
    expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,263</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,561</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,325</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,104</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">797</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">950</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">73,448</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">67,177</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,307</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term debt, less current portion
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,982</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">38,752</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">103,546</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">105,430</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">105,929</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">107,853</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Members&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37,096</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37,187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">38,965</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities and members&#146;
    equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,526</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">143,116</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">146,818</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-65

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRUDENTIAL PORTFOLIO</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='328'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED STATEMENTS OF OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Revenue</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,620</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,920</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">45,118</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">41,853</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">40,227</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property rental income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">580</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">545</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,249</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,270</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,095</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,200</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,465</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47,367</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">44,123</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">42,322</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Expenses</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Facility operating
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,780</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,222</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,537</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25,035</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,777</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Ground lease
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">252</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">252</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,008</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,008</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees&nbsp;&#151;
    affiliate
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">803</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">762</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,332</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,867</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,320</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,268</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,251</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,087</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,994</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,702</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,103</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,487</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,964</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,904</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">32,807</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income from operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,097</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,978</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,403</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,219</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,515</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,367</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,162</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,827</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,629</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,730</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,816</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,576</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,219</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,886</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-66

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRUDENTIAL PORTFOLIO</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='329'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF MEMBERS&#146; EQUITY" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED STATEMENTS OF MEMBERS&#146; EQUITY</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For Three Months Ended March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>and for Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Members&#146;</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Equity</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balance at January&nbsp;1,
    2002</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">47,962</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,886</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Distributions
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,155</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Contributions
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">468</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balance at December&nbsp;31,
    2002</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,161</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,219</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Distributions
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(15,240</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Contributions
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,825</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balance at December&nbsp;31,
    2003</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">38,965</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,576</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Distributions
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,599</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Contributions
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">245</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balance at December&nbsp;31,
    2004</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37,187</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (unaudited)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,730</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Distributions (unaudited)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,821</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Balance at March&nbsp;31, 2005
    (unaudited)</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37,096</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-67

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRUDENTIAL PORTFOLIO</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='330'></A>
</DIV>

<!-- link1 "COMBINED STATEMENTS OF CASH FLOWS" -->

<DIV align="center" style="font-size: 10pt;">
<B>COMBINED STATEMENTS OF CASH FLOWS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For Three Months Ended March&nbsp;31, 2005</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>and for Years Ended December&nbsp;31, 2004, 2003 and 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Three Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">(Unaudited)</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Operating activities</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,730</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,816</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,576</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,219</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,886</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjustments to reconcile net income
    to net cash provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,268</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,251</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,087</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,994</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,702</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Changes in operating assets and
    liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net change in restricted cash
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(68</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">185</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(42</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred rent receivable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(66</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(87</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(109</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and other assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(212</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(426</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(339</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts payable and accrued
    expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(298</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(268</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">236</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(92</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(177</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">307</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(30</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(153</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">302</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash provided by operating
    activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,728</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,304</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,350</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,169</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,815</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Investing activities</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Additions to property, and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(153</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(262</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,180</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(916</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(842</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(153</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(262</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,180</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(916</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(842</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Financing activities</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">34</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">40,200</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,650</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Repayment of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(542</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(517</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,044</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(36,555</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(15,951</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Distributions to members
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,821</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,968</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,599</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(15,240</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,155</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Contributions from members
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">245</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,825</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">468</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Payment of financing costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(494</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(211</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash used in financing
    activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,329</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,485</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(10,361</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,264</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net increase (decrease) in cash and
    cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">246</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(443</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(191</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">774</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents at
    beginning of period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,571</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,762</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,762</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,773</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">999</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents at end of
    period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,817</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,319</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,571</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,762</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,773</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Supplemental non-cash
    activity</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Write-off of fully depreciated
    property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">69</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Write-off of fully amortized
    deferred financing costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">370</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">904</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Supplemental disclosure of cash
    flow information</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest paid
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,459</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,162</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,829</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,906</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,703</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to the combined financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-68

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>PRUDENTIAL PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='331'></A>
</DIV>

<!-- link1 "1. Description of Business" -->

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Description of Business</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements present the operations of nine
assisted living properties owned by limited liability companies
under common control and ownership of affiliates of Prudential
Financial, Inc. and whose day-to-day operations are managed by
Renaissance Senior Living, LLC (&#147;RSL&#148;). RSL also has
an ownership interest in the properties. All nine
properties&#146; operations are included in the combined
financial statements for the periods presented. For purposes of
the combined financial statements, the properties are referred
to as the &#147;Prudential Properties.&#148; The Prudential
Properties are located in various cities in the state of
California and consist of the following:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT face="helvetica,arial">Facilities</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Location</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total Units</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Inn at the Park
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">Irvine</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">134</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Nohl Ranch Inn
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">Anaheim Hills</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">127</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mirage Inn
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">Rancho Mirage</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">125</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Pacific Inn
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">Torrance</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">134</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Ocean House
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">Santa Monica</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">117</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Gables
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">Monrovia</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">64</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">The Lexington
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">Ventura</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">114</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Oak Tree Villa
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">Scotts Valley</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">196</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lodge at Paulin Creek
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">Santa Rosa</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">250</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,261</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary of Significant Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Basis of Presentation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements include the accounts of
Prudential Properties. All significant intercompany balances and
transactions are eliminated in combination. The combined
financial statements are presented as if the Prudential
Properties had operated as one combined entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Prudential Properties&#146; unaudited combined financial
statements as of March&nbsp;31, 2005 and for the three months
ended March&nbsp;31, 2005 and 2004, have been prepared in
accordance with accounting principles generally accepted in the
United States (&#147;GAAP&#148;) for interim financial
information. Accordingly, they do not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. All amounts included
in the footnotes to the combined financial statements, referring
to March&nbsp;31, 2005 and for the three months ended
March&nbsp;31, 2005 and 2004 are unaudited. Operating results
for the three month period ended March&nbsp;31, 2005 are not
necessarily indicative of the results that may be expected for
the year ending December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Use of Estimates</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preparation of the combined financial statements in
accordance with GAAP requires management to make estimates and
assumptions that affect amounts reported and disclosures of
contingent assets and liabilities in the combined financial
statements and accompanying notes. Actual results could differ
from those estimates and assumptions.
</DIV>

<P align="center" style="font-size: 10pt;">F-69

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>PRUDENTIAL PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Cash Equivalents</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Prudential Properties considers all investments with an
original maturity of three months or less to be cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Resident Fee Revenue</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Resident fee revenue is recorded when services are rendered and
consists of fees for basic housing, support services and fees
associated with additional services such as personalized health
and assisted living care. Residency agreements are generally for
a term of one year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Property Rental Income</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Prudential Properties leases a portion of one its facilities
to a third party that operates a skilled nursing facility. The
Prudential Properties records rental income on a straight-line
basis as earned during the lease term. The lease also requires
the tenant to reimburse the Prudential Properties for the
tenant&#146;s share of common area maintenance, real estate
taxes and other recoverable costs. Tenant reimbursement revenue
is recognized as the related expenses are incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Income Taxes</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No provision for federal income taxes is included in the
combined financial statements since such taxes, if any, are
payable by the owners of the Renaissance Properties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Property and Equipment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment are carried at cost less accumulated
depreciation. Expenditures for ordinary maintenance and repairs
are expensed to operations as incurred. Renovations and
improvements, which improve and/or extend the useful life of the
asset are capitalized and depreciated over their estimated
useful life, or if the renovations or improvements are made with
respect to facilities subject to an operating lease, over the
shorter of the estimated useful life of the renovations or
improvements, or the term of the operating lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with Statement of Financial Accounting Standards
(&#147;SFAS&#148;) No.&nbsp;144, <I>Accounting for the
Impairment or Disposal of Long-Lived Assets and Long-Lived
Assets to Be Disposed</I>, the Prudential Properties will record
impairment losses on long-lived assets used in operations when
events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be
generated by those assets during the expected holding period are
less than the carrying amounts of those assets. Impairment
losses will be measured as the difference between carrying value
and fair value of assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Depreciation is provided on a straight-line basis over the
estimated useful lives of assets, which are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT face="helvetica,arial">Asset Category</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Estimated Useful Life</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom" nowrap><FONT face="helvetica,arial">30&nbsp;years</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Furniture and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom" nowrap><FONT face="helvetica,arial">3 - 7&nbsp;years</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-70

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>PRUDENTIAL PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Deferred Costs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred financing costs are recorded at cost and amortized on a
straight-line basis, which approximates the level yield method,
over the term of the related debt. Accumulated amortization was
$428, $383 and $1,017 at March&nbsp;31, 2005 and
December&nbsp;31, 2004 and 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Restricted Cash</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restricted cash consists of amounts held in escrow for the
payment of future real estate taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Fair Value of Financial Instruments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Cash and cash equivalents, restricted cash and variable rate
debt are reflected in the accompanying combined balance sheets
at amounts considered by management to reasonably approximate
fair value. Management estimates the fair value of its long-term
fixed rate debt using a discounted cash flow analysis based upon
Prudential Properties&#146; current borrowing rate for debt with
similar maturities. As of March&nbsp;31, 2005 and
December&nbsp;31, 2004 and 2003, the fair value of fixed-rate
debt approximates book value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Property and Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment consist of the following:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Land
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,872</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,872</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,872</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">123,701</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">123,676</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">123,279</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Furniture and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,670</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,611</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,842</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">161,243</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">161,159</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">159,993</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated depreciation and
    amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(23,078</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,924</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17,121</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">138,165</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">139,235</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,872</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-71

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>PRUDENTIAL PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Debt</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Long-term Debt</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Long-term debt consists of the following as of:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">March&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2005</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2004</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage notes payable bearing
    interest at fixed rates ranging from 4.47% to 7.50% payable in
    monthly installments of principal and, interest maturity dates
    from April 2005 through April 2008
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">53,486</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">53,740</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54,604</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage notes payable bearing
    interest at variable rates ranging from LIBOR (2.87% and 2.4% at
    March&nbsp;31, 2005 and December&nbsp;31, 2004, respectively)
    plus 2.20% to LIBOR plus 2.40%, payable in monthly installments
    of principal and interest, maturity dates in 2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,525</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,771</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">50,923</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Promissory notes payable to various
    financial institutions bearing interest at fixed rates ranging
    from 6.5% to 9.75% payable in monthly installments of principal
    and interest, maturity dates ranging from May 2005 through April
    2008
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">51</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">103,063</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">103,571</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">105,578</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Less current portion
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(71,081</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(64,819</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,032</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total long-term debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,982</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">38,752</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">103,546</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The mortgages notes payable are subject to various operating
covenants. In addition, Prudential Properties must periodically
fund and maintain escrow accounts, to make future real estate
taxes, repairs and maintenance and insurance payments. These are
included in prepaid expenses and other assets. In 2004, certain
mortgage notes payable were extended and converted to fixed rate
debt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Substantially all of Prudential Properties&#146; property and
equipment have been pledged as collateral for its mortgages
notes payable and promissory notes payable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The annual aggregate scheduled maturities of long-term debt
obligations outstanding as of December&nbsp;31, 2004 are as
follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="86%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT face="helvetica,arial">Year Ending December&nbsp;31</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">64,819</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2006
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">727</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2007
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">753</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2008
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">37,272</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">103,571</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Payment of mortgage debt is anticipated through the planned sale
of the Prudential Properties in 2005.
</DIV>

<P align="center" style="font-size: 10pt;">F-72

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>PRUDENTIAL PORTFOLIO</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO COMBINED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2004</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Management Fees&nbsp;&#151; Affiliate</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Prudential Properties are managed by RSL for a fee based on
5% of gross revenue. In addition, RSL can earn an incentive fees
based upon a percentage of specified net operating income, as
defined. Fees paid to RSL were $803, $762, $3,332, $2,867, and
$2,320 for the three months ended March&nbsp;31, 2005 and 2004
and for the years ended December&nbsp;31, 2004, 2003, and 2002,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Property Leasing Arrangement</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
One of the Prudential Properties leases a portion of the
property to a skilled nursing facility operator under an
operating lease. The lease provides for an initial noncancelable
term through 2013 and provides for the tenant to pay their pro
rata share of operating expenses and real estate taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Minimum future rentals under the lease as of December&nbsp;31,
2004 are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Year</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">920</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2006
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">942</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2007
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">966</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2008
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">990</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2009
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,015</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Thereafter
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,129</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,962</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Commitments and Contingencies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Litigation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Prudential Properties are involved in various lawsuits and
subject to various claims arising in the normal course of
business. In the opinion of management, although the outcomes of
these suits and claims are uncertain, in the aggregate, they are
not anticipated to have a material adverse effect on Prudential
Properties&#146; business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Ground Lease</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
One of the Prudential Properties is subject to a ground lease
with an initial lease term through 2016, and two, 33-year
extension options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Minimum future payments under the lease as of December&nbsp;31,
2004 are as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Year</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amount</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2006
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2007
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2008
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2009
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Thereafter
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,958</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,958</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-73

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
<A name='333'></A>
</DIV>

<!-- link1 "REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors
</DIV>

<DIV align="left" style="font-size: 10pt;">
Alterra Healthcare Corporation:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have audited the accompanying consolidated balance sheet of
Alterra Healthcare Corporation and subsidiaries (the Predecessor
Company) as of December&nbsp;31, 2002, and the related
consolidated statements of operations, changes in
stockholders&#146; deficit, and cash flows for the period from
January&nbsp;1, 2003 to November&nbsp;30, 2003 and the year
ended December&nbsp;31, 2002. These consolidated financial
statements are the responsibility of the Predecessor
Company&#146;s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Corporation&#146;s internal control
over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of the Predecessor Company as of
December&nbsp;31, 2002, and the results of their operations and
their cash flows for the period from January&nbsp;1, 2003 to
November&nbsp;30, 2003 and the fiscal year ended
December&nbsp;31, 2002 in conformity with U.S. generally
accepted accounting principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As discussed in notes&nbsp;1 and 2 to the consolidated financial
statements, the Corporation emerged from Chapter&nbsp;11
bankruptcy on December&nbsp;4, 2003. Upon emergence from
bankruptcy, the Corporation changed its basis of financial
statement presentation to reflect the adoption of fresh start
accounting in accordance with AICPA Statement of
Position&nbsp;90-7, <I>Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code.</I>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ KPMG LLP</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Milwaukee,Wisconsin
</DIV>

<DIV align="left" style="font-size: 10pt;">
April&nbsp;13, 2004
</DIV>

<P align="center" style="font-size: 10pt;">F-74

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='334'></A>
</DIV>

<!-- link1 "CONSOLIDATED BALANCE SHEET" -->

<DIV align="center" style="font-size: 10pt;">
<B>CONSOLIDATED BALANCE SHEET</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands, except share data)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="7" align="center" valign="top">
    <B><FONT face="helvetica,arial">Assets</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current assets:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,797</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable, net of
    allowance for bad debts
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,253</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assets held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">57,243</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and supply
    inventory
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,672</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,803</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">108,768</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">492,125</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Restricted cash and investments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,188</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Goodwill, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,515</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,509</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">672,105</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="7" align="center" valign="top">
    <B><FONT face="helvetica,arial">Liabilities and
    Stockholders&#146; Deficit</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current installments of long-term
    obligations, including convertible debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">722,689</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current debt maturities on assets
    held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">79,108</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Short-term notes payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,144</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,812</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,151</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Guaranty liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58,500</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred rent and refundable
    deposits
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,840</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">981,244</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term obligations, less current
    installments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">171,510</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,147</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Redeemable preferred stock
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,132</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Stockholders&#146; deficit:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Predecessor Company Preferred
    stock, Authorized 2,500,000&nbsp;shares; designated
    1,550,000&nbsp;shares; none outstanding
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Predecessor Company Common stock,
    $0.01&nbsp;par value. Authorized 100,000,000&nbsp;shares; issued
    and outstanding 22,266,262&nbsp;shares
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">221</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Predecessor Company Treasury stock,
    $0.01&nbsp;par value. 11,639&nbsp;shares
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(163</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">179,526</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accumulated deficit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(668,512</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total stockholders&#146; deficit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(488,928</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities and
    stockholders&#146; deficit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">672,105</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-75

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='335'></A>
</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt;">
<B>CONSOLIDATED STATEMENTS OF OPERATIONS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Periods January&nbsp;1, 2003 to November&nbsp;30,
2003,</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>and Fiscal Year Ended December&nbsp;31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">11&nbsp;Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fiscal Year</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Revenue:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident service fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">378,672</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">413,553</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">824</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,601</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Miscellaneous
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">546</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">561</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating revenue
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">380,042</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">416,715</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating expenses (income):
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Residence operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">264,069</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">285,171</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Bad debt provision
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,693</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,263</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">57,846</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58,658</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain on lease termination
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,811</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,755</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General and administrative
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,703</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">46,541</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss (gain)&nbsp;on disposal of
    property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,569</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(22,914</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">21,292</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25,766</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Impairment charges
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,859</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,773</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total operating expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">389,220</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">380,299</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,178</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36,416</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other (expense)&nbsp;income:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Interest expense, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(29,851</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(50,556</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of financing costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,648</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,967</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain on debt extinguishments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,683</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain on fresh start debt discharge
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">622,357</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Convertible debt payment-in-kind
    (PIK)&nbsp;interest
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,656</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25,824</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in losses of unconsolidated
    affiliates
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(667</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,856</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Reorganization items
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(28,697</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Fresh start accounting adjustments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(39,363</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Goodwill impairment loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total other (expense)&nbsp;income,
    net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">531,158</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(95,690</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Loss) income before income taxes
    and the cumulative effect of a change in accounting principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">521,980</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59,274</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income tax expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Loss) income from continuing
    operations before cumulative effect of a change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">521,861</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59,374</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(32,933</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(116,762</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(45,866</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net (loss) income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">488,928</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(222,002</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-76

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='336'></A>
</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS&#146; EQUITY (DEFICIT)" -->

<DIV align="center" style="font-size: 10pt;">
<B>CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS&#146;
EQUITY (DEFICIT)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Periods January&nbsp;1, 2003 to November&nbsp;30,
2003,</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>and Fiscal Year Ended December&nbsp;31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Common Stock,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Treasury Stock,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">and Additional</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B><FONT face="helvetica,arial">Paid-in Capital</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Shares</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Accumulated</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT face="helvetica,arial">Predecessor Company</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Outstanding</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Amounts</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Deficit</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Total</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Balances at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,266</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">179,584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(446,510</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(266,926</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(222,002</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(222,002</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Balances at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,266</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">179,584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(668,512</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(488,928</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net loss for the 11&nbsp;months
    ended November&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(94,066</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(94,066</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Balance prior to application of
    fresh start accounting
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,266</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">179,584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(762,578</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(582,994</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Application of fresh start
    accounting
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">582,994</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">582,994</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cancellation of Predecessor Company
    equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(22,266</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(179,584</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">179,584</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Balances at November&nbsp;30, 2003
    of Predecessor Company
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-77

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='337'></A>
</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF CASH FLOWS" -->

<DIV align="center" style="font-size: 10pt;">
<B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Periods January&nbsp;1, 2003 to November&nbsp;30,
2003,</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>and Fiscal Year Ended December&nbsp;31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">11 Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fiscal Year</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash flows from operating
    activities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net (loss) income
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">488,928</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(222,002</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjustment to reconcile net (loss)
    income to net cash (used in) provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">45,866</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain on debt extinguishments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(13,683</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain on fresh start debt discharge
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(622,357</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Fresh start accounting adjustments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39,363</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">21,292</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25,766</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Bad debt provision
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,693</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,263</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Payment-in-kind interest
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,656</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">25,824</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Amortization of financing costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,648</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,967</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss (gain)&nbsp;on disposal of
    property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,569</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(22,914</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Impairment charges
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,859</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,260</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">32,933</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">116,762</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income tax expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity in losses from
    unconsolidated affiliates
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">667</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,856</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Decrease (increase) in net resident
    receivable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,890</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,261</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Decrease in other current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,269</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,057</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Decrease) increase in accounts
    payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,932</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,467</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Decrease) increase in accrued
    expenses and deferred rent
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,908</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,165</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Decrease) increase in past due
    interest and late fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,621</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,373</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Changes in other assets and
    liabilities, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,496</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,672</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash (used in) provided by
    operating activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(22,083</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,877</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash flows (used in) from investing
    activities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Payments for property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,832</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,544</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net proceeds from sale of property
    and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,760</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">60,280</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from sale/leaseback
    transactions
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">62,368</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">39,825</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Decrease in notes receivable, net
    of reserve
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">500</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Changes in investments in and
    advances to unconsolidated affiliates
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,121</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(159</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Purchase of joint venture
    partnership interests
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,400</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash provided by investing
    activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">83,417</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">90,502</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-78

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENTS OF CASH
FLOWS&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>For the Periods January&nbsp;1, 2003 to November&nbsp;30,
2003,</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>and Fiscal Year Ended December&nbsp;31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">11 Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fiscal Year</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash flows (used in) from financing
    activities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Repayments of short-term borrowings
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,724</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3,609</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Repayments of debtor-in-possession
    credit facility
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(14,870</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Repayments of long-term obligations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(100,877</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(111,314</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proceeds from issuance of debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">31,870</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Payments for financing costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,558</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(2,655</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Equity contribution
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net cash used in financing
    activities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17,159</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(117,578</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net (decrease) increase in cash and
    cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">44,175</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(6,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Beginning of period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,797</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,996</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">End of period
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">57,972</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,797</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Supplemental disclosure of cash
    flow information:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash paid for interest, net of
    amounts capitalized
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35,739</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">55,574</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash paid (refunded)&nbsp;for
    reorganization items
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,298</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash paid during year for income
    taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(333</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Noncash items:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Notes issued in exchange for joint
    venture interests
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deconsolidated assets related to
    subsidiary stock transfer
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">189,221</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deconsolidated liabilities related
    to subsidiary stock transfer
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">174,534</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See accompanying notes to consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt;">F-79

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(1)</B></TD>
    <TD>
    <B>Nature of Business and Reorganization and Emergence From
    Chapter&nbsp;11</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra Healthcare Corporation (when referring to both the
Predecessor Company and the Successor Company the term
&#147;Company&#148; is used), develops, owns, and operates
assisted living residences. As of November&nbsp;30, 2003, the
Successor Company operated and managed 332 residences located
throughout the United States with approximate capacity to
accommodate 15,300 residents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On January&nbsp;22, 2003, the Predecessor Company Alterra
Healthcare Corporation (hereinafter referred to as the
Predecessor Company) filed a voluntary petition for relief under
Chapter&nbsp;11 of the United States Bankruptcy Code (the
Bankruptcy Code) in the United States Bankruptcy Court for the
District of Delaware in Wilmington (the Bankruptcy Court) (Case
No.&nbsp;03-10254). All other subsidiaries or affiliates of the
Predecessor Company were excluded from the proceeding and
continued to conduct business in the ordinary course. The
Predecessor Company remained in possession of its assets and
properties and continued to operate its business as a
debtor-in-possession under the jurisdiction and the orders of
the Bankruptcy Court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In conjunction with its Chapter&nbsp;11 Filing, the Predecessor
Company secured a $15.0&nbsp;million debtor-in-possession (the
DIP) credit facility from affiliates of certain principal
holders of the Predecessor Company&#146;s payment-in-kind
securities issued in the summer of 2000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;4, 2003, the Office of the U.S.&nbsp;Trustee
for the District of Delaware appointed an official committee of
unsecured creditors in the Bankruptcy Case (the Creditors
Committee).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;18, 2003, upon application of the American Stock
Exchange (AMEX), the Securities and Exchange Commission struck
the Predecessor Company&#146;s common stock and other securities
from listing and registration on the AMEX.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;27, 2003, the Predecessor Company filed with the
Bankruptcy Court a Plan of Reorganization (the Plan) and a
Disclosure Statement Accompanying Plan of Reorganization (the
Disclosure Statement). Immediately prior to the filing of its
Plan and Disclosure Statement, the Company also filed a motion
(the Bidding Procedures Motion) with the Bankruptcy Court
seeking approval of bidding procedures with respect to the
solicitation and selection of a transaction contemplating either
(i)&nbsp;the sale of capital stock of the Company to be
effective and funded upon the confirmation and effectiveness of
the Plan (an Exit Equity Transaction) or (ii)&nbsp;the sale, as
a going concern, of all or substantially all of the assets of
the Company to be effective and funded upon the confirmation and
effectiveness of the Plan (an Asset Sale Transaction, together
with an Exit Equity Transaction, referred to herein as a
Liquidity Transaction).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July&nbsp;22, 2003, the Predecessor Company executed an
Agreement and Plan of Merger (Merger Agreement) with FEBC,
pursuant to which FEBC would acquire 100% of the common stock of
the Company upon emergence from the Chapter&nbsp;11 bankruptcy
proceeding. Pursuant to the Merger Agreement, FEBC would pay the
Company $76.0&nbsp;million of merger consideration, which may be
adjusted downward in certain circumstances. FEBC would be
capitalized with $76.0&nbsp;million including (i)&nbsp;a
$15.0&nbsp;million senior loan to FEBC from an affiliate of
Fortress Investment Trust&nbsp;II LLC (Fortress), a private
equity fund, and (ii)&nbsp;$61.0&nbsp;million of aggregate
equity contributions. Fortress would provide approximately 75%
of the equity investment to FEBC and would be entitled to
appoint a majority of the directors of the Successor Company
Alterra Healthcare Corporation (hereafter referred to as the
Successor Company). Emeritus Corporation and NW Select LLC would
provide the remaining equity capital to FEBC and would each be
entitled to appoint one director. The merger consideration would
be used (i)&nbsp;to fund costs of the Company&#146;s bankruptcy
and reorganization and
</DIV>

<P align="center" style="font-size: 10pt;">F-80

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
to provide for the working capital and other cash needs of the
Successor Company and (ii)&nbsp;to fund a distribution to the
unsecured creditors. In connection with the execution of the
Merger Agreement, Emeritus and Fortress delivered a Payment
Guaranty to the Successor Company pursuant to which Emeritus and
Fortress guaranteed up to $6.9&nbsp;million and
$69.1&nbsp;million, respectively, of the merger consideration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On July&nbsp;23, 2003, the Predecessor Company presented
FEBC&#146;s Merger proposal as the winning bid at a Bankruptcy
Court hearing in accordance with the court-approved bidding
procedures. Following the hearing, the Bankruptcy Court entered
an order authorizing the Predecessor Company to execute the
Merger Agreement and approving the proposed Merger as the
highest and best bid at the auction conducted by the Predecessor
Company on July&nbsp;17, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor Company filed an Amended Plan of Reorganization
and an Amended Disclosure Statement with the Bankruptcy Court to
incorporate the terms and conditions of the Merger. The Amended
Disclosure Statement, voting procedures, solicitation package,
and ballot forms were approved by the Bankruptcy Court on
September&nbsp;15, 2003. Ballots were mailed September&nbsp;20,
2003, to those eligible to vote on the amended plan of
reorganization. The deadline to return ballots was
October&nbsp;17, 2003, although the Predecessor Company
requested permission from the Bankruptcy Court to accept ballots
and changed ballots submitted subsequent to the original voting
deadline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On November&nbsp;26, 2003, the Bankruptcy Court entered an order
confirming the Predecessor Company&#146;s Second Amended Plan of
Reorganization. The Successor Company emerged on
December&nbsp;4, 2003 (the Effective Date).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Merger Agreement, the maximum distribution to
holders of unsecured claims is approximately $23&nbsp;million
(which includes payments pursuant to settlement agreements with
holders of deficiency claims), which was to be adjusted pursuant
to the Merger Agreement based on working capital and the cash
requirements of the Plan through the Effective Date. Certain
liabilities deemed subject to compromise may have been
subsequently repaid by the Successor Company, pursuant to the
Plan. The following liabilities deemed subject to compromise
were eliminated as of the Effective Date of the Successor
Company&#146;s emergence (in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,319</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General liability insurance reserve
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,860</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued interest on convertible
    debt and notes payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,202</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Guaranty liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58,500</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Notes payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">16,008</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Short-term notes payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">420</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Payment-in-kind debentures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">253,892</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Original debentures
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">187,248</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgage payable and accrued
    interest
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54,682</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Redeemable preferred stock
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,226</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities subject to
    compromise
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">622,357</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-81

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The aggregate net costs resulting from reorganization of the
business have been reported in the Consolidated Statements of
Operations separately as reorganization items. For the eleven
months ended November&nbsp;30, 2003, the following
reorganization items were incurred (in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Legal and consulting fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,899</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lender settlements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,401</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued employee retention plan
    costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,967</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Bankruptcy administration costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,430</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">28,697</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(2)</B></TD>
    <TD>
    <B>Fresh Start Accounting</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On the Effective Date, the Successor Company adopted fresh start
accounting pursuant to the guidance provided by the American
Institute of Certified Public Accountant&#146;s Statement of
Position (SOP)&nbsp;90-7, <I>Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code.</I> For financial
reporting purposes, the Successor Company adopted the provisions
of fresh start accounting effective December&nbsp;1, 2003. In
accordance with the principles of fresh start accounting, the
Successor Company has adjusted its assets and liabilities to
their &#147;fair values&#148; as of December&nbsp;1, 2003. The
Successor Company&#146;s reorganization value was determined to
be equal to the cash amount paid for all of the outstanding
common stock of the Successor Company plus the post emergence
liabilities existing at the reorganization date. To the extent
the fair value of its tangible and identifiable intangible
assets net of liabilities exceeded the reorganization value, the
excess was recorded as a reduction of the amounts allocated to
property and equipment. The net effect of all fresh start
accounting adjustments resulted in an expense of
$39.4&nbsp;million, which is reflected in the Predecessor
Company&#146;s financial results for the 11&nbsp;months ended
November&nbsp;30, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amounts recorded in the consolidated balance sheet of the
Predecessor Company were materially changed with the
implementation of fresh start accounting. Consequently, the
consolidated balance sheet of the Successor Company is not
comparable to that of the Predecessor Company, principally due
to the adjustment of property and equipment, deferred financing
costs, deferred gains, supply inventory, goodwill, long-term
debt, discharge of liabilities subject to compromise, and the
recapitalization of the Successor Company.
</DIV>

<P align="center" style="font-size: 10pt;">F-82

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The effects of the application of fresh start accounting on the
Predecessor Company&#146;s preconfirmation Condensed
Consolidated Balance Sheet are as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ALTERRA HEALTHCARE CORPORATION</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REORGANIZED CONDENSED CONSOLIDATED BALANCE SHEET</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>December&nbsp;1, 2003</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Predecessor</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Successor</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Company</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Company</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Debt</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">New</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fresh start</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;1,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">discharge</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">capital</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">adjustments</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Assets</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current assets:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,925</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(b)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(29,953</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(b)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">57,972</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts receivable, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,014</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Assets held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,683</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">21,854</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(c)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">52,537</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Prepaid expenses and supply
    inventory
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">24,679</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,233</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(d)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,446</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,919</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(38</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(e)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,881</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">84,220</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(17,370</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,850</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">385,232</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,066</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">392,298</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Goodwill, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">32,257</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(32,257</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(g)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">36,020</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(18,464</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(h)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">17,556</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">537,729</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(61,025</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">552,704</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><FONT face="helvetica,arial">Liabilities and
    Stockholders&#146; Equity</FONT></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current installments of long-term
    obligations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">207,027</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(138,076</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(i)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">68,951</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current debt maturities on assets
    held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,157</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,057</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(i)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">49,214</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Short-term notes payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,595</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4,595</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(j)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accounts payable
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,763</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">117</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(e)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,880</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">86,593</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(11,816</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(k)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">74,777</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,381</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,381</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">342,516</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(132,313</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">210,203</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term obligations, less current
    installments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">152,950</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">111,306</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(i)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">264,256</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other long-term liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,900</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(655</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(e)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,245</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Liabilities subject to compromise
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">622,357</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(622,357</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)(a)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,120,723</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(622,357</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(21,662</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">476,704</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Stockholders&#146; equity (deficit)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(582,994</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">622,357</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">(b)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(39,363</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,000</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total liabilities and
    stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">537,729</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(61,025</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">552,704</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-83

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Adjustments reflected in the Reorganized Condensed Consolidated
Balance Sheet are as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(a) &nbsp;Liabilities subject to compromise are eliminated in
accordance with the confirmed Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(b) &nbsp;Cash activity includes receipt of $76.0&nbsp;million
of merger proceeds from FEBC reduced by repayment of the
$14.9&nbsp;million DIP credit facility and lender settlements in
accordance with the confirmed Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(c) &nbsp;Assets held for sale are adjusted to reflect their
estimated fair value and include reclassifications from property
and equipment to include those assets pending disposition in
accordance with the confirmed Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(d) &nbsp;Supply inventory is adjusted to reflect the Successor
Company&#146;s accounting policy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(e) &nbsp;Other assets and liabilities and accounts payable have
been adjusted to reflect their estimated fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(f) &nbsp;Net property and equipment have been adjusted to
reflect their estimated fair value, reduced by negative
reorganization value, and include reclassifications of assets
held for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(g) &nbsp;Goodwill has been eliminated pursuant to fresh start
accounting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(h) &nbsp;Deferred financing and lease costs and deferred loss
on sale/leaseback were eliminated in accordance with the
confirmed Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(i) &nbsp;Current installments of long-term obligations, current
debt maturities on assets held for sale, and long-term
obligations have been adjusted to reflect their estimated fair
value and have been reclassified to reflect appropriate
classifications as of December&nbsp;1, 2003. Additionally, in
accordance with the confirmed Plan, the $14.9&nbsp;million DIP
credit facility was repaid and $10.1&nbsp;million of notes
payable were issued to replace the $9.4&nbsp;million reserve for
JV settlements discussed below in (k).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(j) &nbsp;Short-term notes payable were repaid with a portion of
the merger proceeds in accordance with the confirmed Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(k) &nbsp;Adjustments to accrued expenses include the repayment
of lender settlements from the Merger proceeds and the
replacement of the $9.4&nbsp;million JV settlement reserve with
$10.1&nbsp;million of notes payable as discussed in
(i)&nbsp;above in accordance with the confirmed Plan, offset by
certain accruals required for bankruptcy administration costs.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(3)</B></TD>
    <TD>
    <B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(a)</I></B></TD>
    <TD>
    <B><I>Business</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Alterra Healthcare Corporation develops, owns and operates
assisted living residences. As of December&nbsp;31, 2002, the
Company operated and managed 332 residences located throughout
the United States with approximate capacity to accommodate
15,300 residents.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(b)</I></B></TD>
    <TD>
    <B><I>Principles of Consolidation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. Results of
operations of the majority-owned subsidiaries are included from
the date of acquisition. All significant intercompany balances
and transactions with such subsidiaries have been eliminated in
the consolidation. Investments in other affiliated companies in
which the Company has a minority ownership position are
accounted for on the equity method.
</DIV>

<P align="center" style="font-size: 10pt;">F-84

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(c)</I></B></TD>
    <TD>
    <B><I>Use of Estimates</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America. These accounting principles require
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results may differ from
those estimates.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(d)</I></B></TD>
    <TD>
    <B><I>Recent Accounting Pronouncements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In November 2002, the Financial Accounting Standards Board
(FASB) issued Interpretation No.&nbsp;45, <I>Guarantor&#146;s
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness to Others, an interpretation
of FASB Statements No.&nbsp;5, 57, and 107 and a rescission of
FASB Interpretation No.&nbsp;34</I>. This Interpretation
elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations
under guarantees issued. The Interpretation also clarifies that
a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation
undertaken. The initial recognition and measurement provisions
of the Interpretation are applicable to guarantees issued or
modified after December&nbsp;31, 2002 and application has not
had a material effect on the Company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, the FASB issued a revised Interpretation
No.&nbsp;46 (FIN&nbsp;46R), <I>Consolidation of Variable
Interest Entities.</I> This interpretation provides guidance on
how to identify a variable interest entity (VIE)&nbsp;and
determine when the assets, liabilities, noncontrolling
interests, and results of operations of a VIE need to be
included in a company&#146;s financial statements if it meets
certain criteria as defined in the interpretation. A company
that holds variable interests in an entity will need to
consolidate the entity if the company&#146;s interest in the VIE
is such that the company will absorb a majority of the
VIE&#146;s losses and/or receive a majority of the entity&#146;s
expected residual returns, if they occur. FIN&nbsp;46R also
requires additional disclosures by primary beneficiaries and
other significant variable interest holders. FIN&nbsp;46R is
effective immediately for interests in an entity subject to this
interpretation created after December&nbsp;31, 2003; otherwise,
this interpretation is to be applied by the beginning of the
first annual period beginning after December&nbsp;31, 2004. The
Corporation early adopted FIN&nbsp;46R on September&nbsp;30,
2003. Adoption did not have a material affect on the
consolidated financial statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(e)</I></B></TD>
    <TD>
    <B><I>Cash Equivalents</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company considers all highly liquid investments with
original maturities of less than ninety days to be cash
equivalents for purposes of the consolidated financial
statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(f)</I></B></TD>
    <TD>
    <B><I>Supply Inventory</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Successor Company adopted a policy to expense supply
inventory in the period in which the purchases are made. The
Predecessor Company capitalized supply inventory associated with
newly opened residences. In accordance with the confirmed Plan,
all supply inventory was eliminated through fresh start
accounting. The Company believes expensing supplies will not
materially affect results of operations in future periods.
</DIV>

<P align="center" style="font-size: 10pt;">F-85

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(g)</I></B></TD>
    <TD>
    <B><I>Long-lived Assets</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment are stated at historical cost net of
accumulated depreciation for the Predecessor Company. Property
and equipment under capital leases are stated at the present
value of minimum lease payments. Depreciation is computed over
the estimated useful lives of the assets using the straight-line
method. Buildings and improvements are depreciated over
40&nbsp;years, leasehold improvements over 13&nbsp;years, and
furniture, fixtures, and equipment are depreciated over 3 to
7&nbsp;years. Maintenance and repairs are expensed as incurred.
The carrying value of residences owned and operated under
capital leases are periodically evaluated for impairment on the
established undiscounted cash flows including the residual value
of the properties. An impairment loss is recognized when the
present value of estimated cash flows, including the estimated
residual value, is less than the carrying amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Goodwill of the Company represented the costs of acquired net
assets in excess of their fair market values. The Company
adopted the provisions of SFAS&nbsp;No.&nbsp;142, <I>Goodwill
and Other Intangible Assets</I>, as of January&nbsp;1, 2002.
Goodwill and intangible assets acquired in a purchase business
combination and determined to have an indefinite useful life are
not amortized, but instead tested for impairment at least
annually in accordance with the provisions of
SFAS&nbsp;No.&nbsp;142. SFAS&nbsp;No.&nbsp;142 also requires
that intangible assets with estimable useful lives be amortized
over their respective estimated useful lives, and reviewed for
impairment in accordance with SFAS&nbsp;No.&nbsp;144,
<I>Accounting for Impairment or Disposal of Long-Lived
Assets.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the transitional provisions of SFAS&nbsp;No.&nbsp;142, the
Company identified its reporting units and performed impairment
tests on the net goodwill associated with each of these
reporting units. The fair value of the owned reporting units was
determined by estimating the terminal value of the future cash
flows. The fair value of the leased reporting units was
determined by estimating the present value of the cash flows for
the life of the lease. Based on this impairment testing, the
Company recorded an impairment loss of $54.7&nbsp;million in the
first quarter of 2002, of which $8.8&nbsp;million is associated
and reported with those residences classified as discontinued
operations. The impairment loss has been recorded as a
cumulative effect of change in accounting principle and as loss
on discontinued operations in the accompanying consolidated
statements of operations for the year ended December&nbsp;31,
2002. As of December&nbsp;31, 2002, the Company performed its
annual impairment test required by the provisions of
SFAS&nbsp;No.&nbsp;142 and an additional impairment loss of
$9.5&nbsp;million was identified based on revised cash flow
projections. The $9.5&nbsp;million annual impairment loss has
been recorded in other expenses in the accompanying consolidated
statements of operations for the year ended December&nbsp;31,
2002. As of November&nbsp;30, 2003, the Company had recorded
$32.2&nbsp;million of goodwill. In accordance with fresh start
accounting principles, the Predecessor Company&#146;s goodwill
was eliminated effective December&nbsp;1, 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(h)</I></B></TD>
    <TD>
    <B><I>Assets Held For Sale</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Property and equipment held for sale are carried at the lower of
cost or estimated fair value less costs to sell. Depreciation
and amortization are suspended during the period the assets are
classified as held for sale.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(i)</I></B></TD>
    <TD>
    <B><I>Deferred Financing Costs</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financing costs related to the issuance of debt are capitalized
and included in other assets and are amortized to interest
expense using the effective-interest method over the term of the
related
</DIV>

<P align="center" style="font-size: 10pt;">F-86

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
debt. As of December&nbsp;1, 2003, approximately
$15.4&nbsp;million of net deferred financing costs have been
eliminated through fresh start accounting.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(j)&nbsp;</I></B></TD>
    <TD>
    <B><I>Revenue</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Resident service fees including move-in fees are recognized when
services are rendered and are reported at net realizable
amounts. Management fees are recognized in the month in which
services are performed based on the terms of the management
agreements in place for managed residences owned by third
parties and, for the Predecessor Company only, those operated
under unconsolidated joint venture arrangements. Management fees
are generally earned based on a percentage of the
residence&#146;s revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Miscellaneous revenue includes fees from the beauty shop,
pharmacy, incontinence care program, and vending machine revenue.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(k)</I></B></TD>
    <TD>
    <B><I>Income Taxes</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the expected future tax consequences attributable to temporary
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that
includes the enactment date. When it has been determined that it
is more likely than not that a deferred tax asset will not be
realized, a valuation allowance is established.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(l)</I></B></TD>
    <TD>
    <B><I>Stock Options</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For financial reporting purposes, the Predecessor Company
applied the intrinsic value method of APB Opinion No.&nbsp;25 in
accounting for stock options and, accordingly, compensation cost
has been recognized only for stock options granted below fair
market value. Had the Predecessor Company determined
compensation cost based on the fair value method prescribed by
SFAS&nbsp;No.&nbsp;123 the Predecessor Company&#146;s net income
would have decreased or net loss would have increased as follows
(in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">11&nbsp;Months Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Year Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30, 2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31, 2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net income (loss) as reported
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">488,928</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(222,002</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Compensation expense under the fair
    value based method
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(37</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Proforma net income (loss)
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">488,891</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(222,042</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There were no options granted in 2003 or 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reclassifications</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain reclassifications have been made to the 2002 financial
statements to conform to the 2003 presentation.
</DIV>

<P align="center" style="font-size: 10pt;">F-87

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(4)</B></TD>
    <TD>
    <B>Joint Venture Activity</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor Company entered into the following joint venture
settlements during 2002:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In January 2002 the Company closed on the buyout of joint
    venture partner interests in one residence with an aggregate
    capacity of 42 residents in connection with a modification and
    settlement agreement with one investor group. The Company paid
    $600,000 in consideration for these acquired interests.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In October 2002 the Company closed on the buyout of joint
    venture partner interests in one residence with an aggregate
    capacity of 40 residents. In consideration for the acquired
    interests the Company paid $800,000 in cash and issued a
    $1.0&nbsp;million note.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In December 2002 the Company entered into an agreement with one
    joint venture partner pursuant to which the Company agreed to
    purchase all the remaining joint venture interests not held by
    the Company in eight residences and to acquire promissory notes
    previously issued by the Company aggregating approximately
    $3.6&nbsp;million in exchange for the issuance of a five year
    promissory note for $7.2&nbsp;million from the Company. This
    settlement was effective with the Plan confirmation and the
    consummation of the merger.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company entered into the following joint venture settlements
during 2003:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    In October 2003 the Company entered into an agreement with the
    Company&#146;s remaining joint venture partner group pursuant to
    which the Company agreed to purchase all of the remaining joint
    venture interests not held by the Company in 32 residences and
    to secure the release of the Company with respect to all claims
    held by these joint venture partners. Pursuant to this
    settlement agreement approved by the Court, the limited partners
    are entitled to receive from the Company an aggregate of
    $2.9&nbsp;million of five-year promissory notes. This settlement
    was effective with the Plan confirmation and consummation of the
    merger.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(5)</B></TD>
    <TD>
    <B>Assets Held for Sale</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor Company previously adopted a plan to dispose of
or terminate leases on 143 residences with an aggregate capacity
of 6,499 residents and 33 parcels of land. Residences included
in the disposition plan were identified based on an assessment
of a variety of factors, including geographic location,
residence size, operating performance, and creditor negotiations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Predecessor Company has recorded an impairment loss on its
properties held for sale whenever their carrying value cannot be
fully recovered through the estimated cash flows, including net
sale proceeds. The amount of the impairment loss recognized is
the difference between the residence&#146;s carrying value and
the residence&#146;s estimated fair value less costs to sell.
The Company&#146;s policy is to consider a residence to be held
for sale when the Company has committed to a plan to sell such
residence and active marketing activity has commenced or it is
expected to commence in the near term. During the year ended
December&nbsp;31, 2002, the Predecessor Company recognized an
impairment loss of $12.9&nbsp;million and reclassified as held
for sale 19 residences included as part of executed deed in lieu
restructuring agreements and six leased residences with pending
sales. The impairment loss and revenues and expenses of those
residences classified as held for sale subsequent to
January&nbsp;1, 2002 have been recorded as discontinued
operations in the consolidated statements of operations.
</DIV>

<P align="center" style="font-size: 10pt;">F-88

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of November&nbsp;30, 2003, 21 residences and five land
parcels are held for sale. Assets held for sale principally
comprises current assets and liabilities and net property and
equipment. The corresponding mortgage liability is recorded in
current debt maturities on assets held for sale. The Company
expects to sell these residences and land parcels within twelve
months of the date they are designated as held for sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table represents condensed operating information
included in the loss on discontinued operations of the
Consolidated Statements of Operations of the Company (in
thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">11 Months Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fiscal Year Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30, 2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31, 2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Operating loss
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1,824</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,559</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Impairment charges
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(5,213</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(12,942</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Guaranty liability
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(58,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net asset write off of former
    subsidiary
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(24,060</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Gain (loss) on debt extinguishment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,954</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on sale or disposal of
    residences
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25,896</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(9,826</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Cumulative effect of change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(8,829</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss on discontinued operations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(32,933</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(116,762</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are a number of factors that may affect the timing of a
sale and the sale price that will ultimately be achieved for
these residences, including, among other things, the following:
potential increased competition from any other assisted living
residences in the area, the relative attractiveness of assisted
living residences for investment purposes, interest rates, the
actual operations of the residence, and the ability to retain
existing residents and attract new residents. As a result, there
is no assurance as to what price will ultimately be obtained
upon a sale of these residences or the timing of such a sale.
The estimated fair value of the assets held for sale is
reflected in current assets and the outstanding debt related to
the assets held for sale is reflected in current liabilities on
the consolidated balance sheets.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(6)</B></TD>
    <TD>
    <B>Property and Equipment</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2002, property and equipment comprises
the following (in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Land and improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">61,490</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Buildings and leasehold improvements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">444,880</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Furniture, fixtures, and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">88,457</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">594,827</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Less accumulated depreciation and
    amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(102,702</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">492,125</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
At December&nbsp;31, 2002, property and equipment includes
$88.3&nbsp;million of buildings and improvements held under
capital and financing leases. The related accumulated
amortization totaled $8.7&nbsp;million at December&nbsp;31, 2002.
</DIV>

<P align="center" style="font-size: 10pt;">F-89

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(7)</B></TD>
    <TD>
    <B>Unconsolidated Affiliates and Managed Residences</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company managed certain residences operated by joint
ventures in which it either had no ownership or a minority
ownership position, typically less than 10%. As of
December&nbsp;31, 2002, the Company owned minority equity
interests in entities owning or leasing (and also managed) 18
residences. Substantially all the earnings of these
unconsolidated residences are included in the consolidated
statements of operations. Effective September&nbsp;30, 2003, the
Predecessor Company early adopted FASB Interpretation
No.&nbsp;46, <I>Consolidation of Variable Interest Entities, an
interpretation of ARB No.&nbsp;51</I>, and based on an
evaluation of the Company&#146;s unconsolidated joint ventures,
the residences operating under those joint ventures have been
consolidated. Included in other current assets of the
Company&#146;s balance sheet are net investment in and advances
to affiliates of $1.7&nbsp;million as of December&nbsp;31, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The results of operations of these unconsolidated and managed
residences operating under joint venture arrangements for
11&nbsp;months ended November&nbsp;30, 2003 and 2002 are as
follows (in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">11 Months Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fiscal Year Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30, 2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31, 2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Resident service fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14,872</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">41,586</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Residence operation expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">10,800</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,337</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Residence profit
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,072</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,249</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Management fee expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">704</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,311</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Financing expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,603</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">8,338</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">(Loss) income before tax
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(235</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">600</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financing expense on these residences includes $3.8&nbsp;million
and $13.8&nbsp;million of lease and mortgage expense in 2003 and
2002 respectively, which represents lease income to the Company
from these residences through September&nbsp;30, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also manages certain other residences, including
residences managed as a result of the transfer of title to all
the stock of its subsidiary to a third party. As of
November&nbsp;30, 2003 and 2002, the Company managed 17 and 29
residences, respectively.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(8)</B></TD>
    <TD>
    <B>Restricted Cash and Investments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Restricted cash and investments consist of debt service reserves
with interest rates ranging from 1% to 3% and maturities ranging
from one to twelve months.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(9)</B></TD>
    <TD>
    <B>Goodwill</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards
(SFAS)&nbsp;No.&nbsp;142, &#147;Goodwill and Other Intangible
Assets,&#148; having a required effective date for fiscal years
beginning after December&nbsp;15, 2001. Under
SFAS&nbsp;No.&nbsp;142, goodwill and other intangible assets
deemed to have indefinite lives are no longer amortized but will
be subject to annual impairment tests in accordance with the
Statement. Other intangible assets will continue to be amortized
over their useful lives. The Company adopted
SFAS&nbsp;No.&nbsp;142 effective January&nbsp;1, 2002.
</DIV>

<P align="center" style="font-size: 10pt;">F-90

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Supplemental comparative disclosure as if the change had been
retroactively applied to the prior period is as follows (in
thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">11 Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fiscal Year</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Reported income (loss) from
    continuing operations before cumulative effect of change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">521,861</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59,374</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Add: Goodwill amortization
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Adjusted net income (loss) from
    continuing operations before cumulative effect of change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">521,861</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59,374</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(10)</B></TD>
    <TD>
    <B>Other Assets</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Other assets comprises the following at December&nbsp;31, 2002
(in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred financing costs, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18,710</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Lease security deposits
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,443</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deposits and other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,356</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total other assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">33,509</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-91

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(11)</B></TD>
    <TD>
    <B>Long-term Debt, Capital Leases, Redeemable Preferred Stock,
    and Financing Obligations</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Long-term debt, redeemable preferred stock, capital leases, and
financing obligations comprises the following at
December&nbsp;31, 2002 (in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">5.25%&nbsp;convertible subordinated
    debentures due December&nbsp;15, 2002, originally callable by
    the Company on or after December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">112,043</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">7.00%&nbsp;convertible subordinated
    debentures due June&nbsp;1, 2004, originally callable by the
    Company on or after June&nbsp;15, 2000
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">40,355</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">6.75%&nbsp;convertible subordinated
    debentures due June&nbsp;30, 2006, originally callable by the
    Company on or after July&nbsp;15, 2000
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">34,850</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">9.75% Series&nbsp;A convertible
    debentures due May&nbsp;31, 2007, originally callable by the
    Company on or after May&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">42,500</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">9.75% Series&nbsp;B convertible
    debentures due May&nbsp;31, 2007, originally callable by the
    Company on or after May&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">155,167</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">9.75% Series&nbsp;C convertible
    debentures due May&nbsp;31, 2007, originally callable by the
    Company on or after May&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">54,762</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total convertible debt
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">439,677</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Mortgages payable, due from 2004
    through 2037; weighted average interest rate of 6.46%
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">131,719</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capital and financing lease
    obligation payable through 2020; weighted average interest rate
    of 11.48%
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,967</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Serial and term revenue bonds
    maturing serially from 2003 through 2013; interest rate of 7.34%
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">3,405</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Notes payable to former joint
    venture partners through 2008; interest rates of 9.0%
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15,286</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Capital leases, financing
    obligations and mortgage payable in default and subject to
    acceleration; interest rates from 4.35% to 8.0%
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">306,253</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total long-term obligations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">973,307</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Less current installments and debt
    maturities on assets held for sale
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">801,797</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total long-term obligations, less
    current installments
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">171,510</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain of the Company&#146;s debt agreements require the
Company to maintain financial ratios, including a debt service
coverage ratio and occupancy ratio. As of November&nbsp;30, 2003
the Company had obtained waivers for all past defaults.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2002, the Company was in violation of
various covenants with several of its credit facilities. As the
Company&#146;s principal credit, lease, and other financing
facilities were cross-defaulted to a material default occurring
under other credit, lease, or financing facilities, a payment
default by the Company under one such facility resulted in the
Company being in default under other such facilities.
Obligations in the amount of $306.2&nbsp;million were classified
as current liabilities at December&nbsp;31, 2002 because the
applicable lenders had the right to accelerate their loans due
to the existence of a default.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Mortgages payable are collateralized by security agreements
on property and equipment guarantees by the Company. In
addition, certain security agreements require the Company to
</DIV>

<P align="center" style="font-size: 10pt;">F-92

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
maintain collateral and debt reserve funds. These funds are
recorded as restricted cash and long-term investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company leases property and equipment with net book values
of $88.3&nbsp;million at December&nbsp;31, 2002, through various
capital and financing leases. See note&nbsp;18 for further
information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unsecured notes payable outstanding to former joint venture
partners total $15.3&nbsp;million at December&nbsp;31, 2002. See
note&nbsp;4 for further information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2000, the Company completed a financing transaction in which
it issued $173.0&nbsp;million of convertible debentures and
convertible preferred shares to several investors, including
affiliates of the Company. The securities issued were initially
convertible at $4.00&nbsp;per share, bear a 9.75% semi-annual
payment-in-kind (PIK)&nbsp;coupon or dividend, and have a
seven-year maturity. The Company could call the securities at
any time after three years if the trading price of the
Company&#146;s Common Stock averaged at least $8.00 for the
preceding 30 trading days. This initial closing contemplated
that the Company had the option to issue up to an additional
$29.9&nbsp;million of these debentures within 180&nbsp;days
following the May&nbsp;31, 2000 closing. The Company recorded a
gain on the early extinguishment of debt of $8.5&nbsp;million
related to its retirement of $41.4&nbsp;million of convertible
debt in the initial closing. On August&nbsp;10, 2000, the
Company exercised its option to issue the additional
$29.9&nbsp;million of securities, thereby increasing the overall
financing transaction to a total of $203.0&nbsp;million (the
May&nbsp;31, 2000 and August&nbsp;10, 2000 closings are referred
to together as the 2000 Equity-Linked Transaction). The
securities issued in this transaction include the following:
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(a)</I></B></TD>
    <TD>
    <B><I>Series&nbsp;A Stock</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
1,250,000&nbsp;shares of the Series&nbsp;A Stock were sold for
the stated value, $4.00&nbsp;per share, representing aggregate
proceeds of $5&nbsp;million.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(b)</I></B></TD>
    <TD>
    <B><I>Series&nbsp;A Debentures</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The $42.5&nbsp;million original aggregate principal amount of
9.75% Series&nbsp;A convertible pay-in-kind debentures due
May&nbsp;31, 2007 bore PIK interest at 9.75%&nbsp;per annum
payable semi-annually in the form of additional Series&nbsp;B
debentures on January 1 and July&nbsp;1 of each year.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(c)</I></B></TD>
    <TD>
    <B><I>Series&nbsp;B Debentures</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The $112.6&nbsp;million original aggregate principal amount of
9.75% Series&nbsp;B convertible pay-in-kind debentures due
May&nbsp;31, 2007 bore PIK interest at 9.75%&nbsp;per annum
payable semi annually in the form of additional Series&nbsp;B
debentures on January 1 and July&nbsp;1 of each year.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(d)</I></B></TD>
    <TD>
    <B><I>Series&nbsp;C Debentures</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The $42.8&nbsp;million original aggregate principal amount of
9.75% Series&nbsp;C convertible pay-in-kind debentures due
May&nbsp;31, 2007 bore PIK interest at 9.75%&nbsp;per annum
payable semi-annually in the form of additional Series&nbsp;C
debentures on January 1 and July&nbsp;1 of each year.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(12)</B></TD>
    <TD>
    <B>Short-term Notes&nbsp;Payable</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2001, the Predecessor Company obtained a $7.5&nbsp;million
Bridge Loan that had an initial six-month term, was secured by
first mortgages on several residences, and originally bore
interest at an escalating interest rate, commencing at
10%&nbsp;per annum. At the Company&#146;s election, the Bridge
Loan
</DIV>

<P align="center" style="font-size: 10pt;">F-93

</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
was extended by an additional six months whereupon the Bridge
Loan became convertible into convertible subordinated debentures
of the Company having rights and terms substantially similar to
the Series&nbsp;B 9.75% pay-in-kind convertible debentures, but
having a conversion price equal to $75&nbsp;per share of
Series&nbsp;B preferred stock (a Common Stock equivalent price
of $0.75&nbsp;per share). The bridge lenders were entitled to
participate in any transaction involving the issuance by the
Company of equity or equity-linked securities during the term of
the Bridge Loan. Effective March&nbsp;1, 2002, the Company
entered into an amendment with the bridge lenders that fixed the
interest rate on the Bridge Loan at 9.0%&nbsp;per annum and
extended the maturity date for the Bridge Loan to
January&nbsp;5, 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(13)</B></TD>
    <TD>
    <B>Accrued Expenses</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Accrued expenses comprise the following at December&nbsp;31,
2002 (in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued salaries and wages
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">13,520</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued interest
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">30,440</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">General liability insurance reserve
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,098</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued property taxes
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6,373</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued vacation
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,751</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued workers compensation expense
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">955</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Reserve for loss on joint venture
    settlements
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9,407</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued professional fees related
    to bankruptcy administration
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">766</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,841</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total accrued expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">92,151</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is self-insured or retains a portion of the exposure
for losses related to workers compensation, healthcare benefits,
and general liability costs. The reserves as of
December&nbsp;31, 2002 are based on claims filed and an
actuarial estimate of expected losses.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(14)</B></TD>
    <TD>
    <B>Stockholders&#146; Equity</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;10, 1998, the Company entered into a Rights
Agreement with American Stock Transfer&nbsp;&#38; Trust Company,
as Rights Agent, pursuant to which it declared and paid a
dividend of one preferred share purchase right (a Right) for
each outstanding share of Common Stock. Each Right entitles the
registered holder to purchase from the Company one one-hundredth
of a share of Series&nbsp;A Junior Participating Preferred
Stock, $0.01&nbsp;par value per share (the Preferred Shares), of
the Company at a price of $130.00&nbsp;per one one-hundredth of
a Preferred Share.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(15)</B></TD>
    <TD>
    <B>Stock Options</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock options are granted with an exercise price equal to the
stock&#146;s fair market value at the date of grant. Generally,
stock options had 10-year terms, vested 25%&nbsp;per year, and
would become fully exercisable after four years from the date of
grant. At December&nbsp;31, 2002, 1,371,460&nbsp;shares were
available for grant under the Stock Option Plan. There were no
options granted or exercised during 2003.
</DIV>

<P align="center" style="font-size: 10pt;">F-94

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock option activity during the years ended December&nbsp;31,
2002 was as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Number</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Weighted Average</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">of shares</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Exercise Price</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Balance at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">965,187</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12.65</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Granted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,000,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1.31</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Exercised
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Forfeited
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">267,170</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">14.06</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,698,017</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5.75</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Granted
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Exercised
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Forfeited
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">569,477</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1.31</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,128,540</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7.04</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stock options outstanding at December&nbsp;31, 2002 are as
follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Number</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Average</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Number</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Range of</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Outstanding at</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Remaining</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Weighted</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Exercisable at</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Weighted</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Exercise</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Contractual</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Average</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Average</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Prices</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Life</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Price</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Price</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">$&nbsp;0.09&nbsp;-&nbsp;&nbsp;1.40</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">501,229</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.0</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1.31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">167,896</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1.30</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;&nbsp;<FONT face="helvetica,arial">1.40&nbsp;-&nbsp;&nbsp;8.69</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">354,313</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5.80</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">324,249</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5.81</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;&nbsp;<FONT face="helvetica,arial">8.70&nbsp;-&nbsp;17.94</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">55,807</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15.66</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">55,807</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">15.66</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">&nbsp;17.95&nbsp;-&nbsp;20.81</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">190,895</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">6.0</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18.80</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">189,517</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">18.81</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">&nbsp;20.82&nbsp;-&nbsp;29.56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,296</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29.34</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">26,296</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">29.34</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">Total</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,128,540</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7.04</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">763,765</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">9.57</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">F-95

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(16)</B></TD>
    <TD>
    <B>Income Taxes</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The components of the provision for income taxes for the period
ended November&nbsp;30, 2003 and year ended December&nbsp;31,
2002, are as follows (in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">11 Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fiscal Year</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Income tax expense (benefit):
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Current:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Federal
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">State
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total current
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Federal
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">State
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total deferred
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">119</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">100</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred tax assets and liabilities consist of the following at
December&nbsp;31, 2002 (in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred tax assets:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Net operating loss carryforwards
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">163,566</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Development write-off
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">2,250</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Building reserve
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">27,352</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accrued expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">12,593</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Investment in unconsolidated
    affiliates
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,017</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Loss contingency
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">22,815</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">741</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total deferred tax assets
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">230,334</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Less valuation allowance
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(218,899</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred tax assets, net of
    valuation allowance
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,435</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred tax liabilities:
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Property and equipment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4,550</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred gain on sale/leaseback
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">5,170</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">1,715</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Deferred tax liabilities
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">11,435</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    During 2000, a valuation allowance was established because the
    Company was uncertain that such deferred tax assets in excess of
    the applicable reversing deferred tax liabilities would be
    realized in future years. The valuation allowance established to
    reduce deferred tax assets as of December&nbsp;31, 2002 was
    $218.9&nbsp;million. In assessing the realizability of deferred
    tax assets, management considers whether it is more likely than
    not that some portion of all of the deferred tax assets will not
    be realized. The ultimate realization of deferred tax assets is</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">F-96

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    dependent upon the generation of future taxable income during
    the periods in which those temporary differences become
    deductible. Management considers the scheduled reversal of
    deferred tax liabilities, projected future taxable income, and
    tax planning strategies in making this assessment.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The effective tax rate on income before income taxes varies from
the statutory Federal income tax rate as follows:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">11 Months</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Fiscal Year</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Ended</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">November&nbsp;30,</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">December&nbsp;31,</FONT></B></TD><TD></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2003</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">2002</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Statutory rate
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">State taxes, net
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4.0</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">4.0</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Valuation allowance
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(59.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(25.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">PIK interest
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">&#151;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(4.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Stock transfer
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">23.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(7.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Other
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(3.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(1.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Effective rate
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">(0.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">)%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">0.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT face="helvetica,arial">%</FONT></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has approximately $419.4&nbsp;million of regular net
operating loss carryforwards at December&nbsp;31, 2002. Any
unused net operating loss carryforwards will expire commencing
in years 2007 through 2022. As a result of the emergence from
bankruptcy, the net operating loss carryforwards were reduced to
$116.6&nbsp;million. These net operating loss carryforwards are
subject to limitations under Section&nbsp;382 of the Internal
Revenue Code.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(17)</B></TD>
    <TD>
    <B>Disclosures About Fair Value of Financial Instruments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practical to estimate that value:
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(a)</I></B></TD>
    <TD>
    <B><I>Cash and Cash Equivalents</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying amount approximates fair value because of the short
maturity of those instruments.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(b)</I></B></TD>
    <TD>
    <B><I>Restricted Cash</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying amount approximates fair value because of the short
maturity of the underlying investments. Restricted cash is
classified as such because it is restricted as collateral for
lease arrangements and debt service reserves.
</DIV>

<P align="center" style="font-size: 10pt;">F-97

</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>(c)</I></B></TD>
    <TD>
    <B><I>Short-term Notes&nbsp;Payable, Mortgages Payable,
    Convertible Subordinated Debentures Payable</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying amount of short-term notes payable approximates
fair value because of the short maturity of those instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The carrying amount of mortgages payable and financing
obligations approximates fair value because the stated interest
rates approximate fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fair value of the Company&#146;s convertible subordinated
debentures is estimated based on quoted market prices. At
December&nbsp;31, 2002, the Company&#146;s convertible
subordinated debentures had a book value of $187.3&nbsp;million.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(18)</B></TD>
    <TD>
    <B>Sale Leasebacks, Lease Commitments and Contingencies</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Merger Agreement, the maximum distribution to
holders of unsecured claims is approximately $23&nbsp;million
(which includes payments pursuant to settlement agreements with
holders of deficiency claims), which will be adjusted pursuant
to the Merger Agreement based on working capital and the cash
requirements of the Plan through the Effective Date. Certain
creditors of the Company have filed requests for payment with
the Bankruptcy Court. Additionally, a number of administrative
claims have been filed with the Bankruptcy Court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into sale/leaseback agreements with
certain REITs as a source of financing the development,
construction, and to a lesser extent, acquisitions of assisted
living residences. Under such agreements, the Company typically
sells to the REIT one or more residences at a negotiated value
and simultaneous with such sale, the Company enters into a lease
agreement for such residences. The initial terms of the leases
vary from 10 to 15&nbsp;years and include aggregate renewal
options ranging from 15 to 30&nbsp;years. The Company is
responsible for all operating costs, including repairs, property
taxes, and insurance. The annual minimum lease payments are
based upon a percentage of the negotiated sales value of each
residence. The residences sold in sale/leaseback transactions
typically are sold for an amount equal to or less than their
fair market value. The leases are accounted for as operating or
capital leases with any applicable gain or loss realized in the
initial sales transaction being deferred and amortized into
income in proportion to rental expense over the initial term of
the lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2002, the Company completed sale/leaseback transactions
accounted for as a financing of 12 residences with REITs for an
aggregate purchase price of $40.6&nbsp;million. The proceeds of
this refinancing were used principally to retire mortgage loan
and accrued interest obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In February&nbsp;2003, the Company sold 25 residences,
extinguished the related debt, and leased back the facilities
under an operating lease. The Company also refinanced
$6.9&nbsp;million of debt secured by six residences.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of November&nbsp;30, 2003, the Company had six
multi-residence portfolios leased from various REITs. These
portfolios include an aggregate of 225 residences with an
aggregate capacity of 9,609&nbsp;beds. The Company has entered
into restructuring agreements with respect to five of these
leased portfolios, including amendments of certain lease
covenants and terms and, in three lease facilities, the
conversion of individual leases into single master leases. The
cash rent due under one
</DIV>

<P align="center" style="font-size: 10pt;">F-98

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
lease facility was modified through the application of various
deposits held by the landlord to satisfy a portion of the cash
rent obligation in the early years of the restructured master
lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company is required by certain REITs to obtain a letter of
credit as collateral for leased residences. Outstanding letters
of credit at November&nbsp;30, 2003 and December&nbsp;31, 2002
were $3.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to leased residences, the Company leases certain
office space and equipment under noncancelable operating leases
with remaining initial terms of between 2 and 18&nbsp;years.
Rental expense on all operating leases, including residences,
for the 11&nbsp;month period ended November&nbsp;30, 2003, and
the fiscal year ended December&nbsp;31, 2002 was
$57.8&nbsp;million, $58.7&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Future minimum lease payments for the next five years and
thereafter under noncancelable leases at November&nbsp;30, 2003,
are as follows (in thousands):
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Capital</FONT></B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B><FONT face="helvetica,arial">Operating</FONT></B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2004
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">19,410</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">59,673</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2005
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,728</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">59,243</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2006
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,728</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">58,548</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2007
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,728</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">55,951</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">2008
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">7,728</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">51,308</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Thereafter
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">142,076</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">508,828</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total minimum lease payment
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">192,398</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">793,551</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Less amount representing interest
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">115,431</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Long-term capital lease obligations
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">76,967</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The minimum lease payments presented are the base rents at the
initial term of the lease. The base rents may increase after the
initial year on certain leases by the increase in the consumer
price index and for other leases, as a percentage of increased
gross revenues of the leased residence, thus the amounts being
paid may be greater than the minimum lease payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From time to time, the Company is involved in various legal
proceedings relating to claims arising in the ordinary course of
its business. Neither the Company nor its subsidiaries is a
party to any legal proceeding, the outcome of which,
individually or in the aggregate, is expected to have a material
adverse affect on the Company&#146;s financial condition or
results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B>(19)</B></TD>
    <TD>
    <B>Subsequent Events</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An additional nine residences and five land parcels were
designated as assets held for sale effective December&nbsp;1,
2003. In the period from December&nbsp;1, 2003 to
December&nbsp;31, 2003, nine residences were sold or disposed of
and approximately $28.6&nbsp;million in debt was repaid or was
assumed by the buyer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January&nbsp;2004, the Company paid in full
$17.1&nbsp;million of debt outstanding as of December&nbsp;31,
2003 relating to seven residences.
</DIV>

<P align="center" style="font-size: 10pt;">F-99

</FONT>

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<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt;">
<B>ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>November 30, 2003 and December 31, 2002</B>
</DIV>

<DIV align="center" style="font-size: 10pt;">
<B>(In thousands)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January&nbsp;2004, the Company&#146;s Board of Directors
approved a plan to sell an additional 13 residences. These
properties are included in property and equipment at
December&nbsp;31, 2003 and have a net book value of
$11.3&nbsp;million. The estimated fair value of these properties
exceeds their carrying value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company terminated five residence leases and sold one land
parcel subsequent to December&nbsp;31, 2003. Additionally,
pursuant to a prior agreement with one of the Company&#146;s
lenders, two residences were foreclosed upon. There was no
significant gain or loss associated with these transactions.
</DIV>

<P align="center" style="font-size: 10pt;">F-100

</FONT>

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<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 2pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 27%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt;">
<B>PROSPECTUS</B>
</DIV>

<DIV align="center" style="font-size: 29pt;">
<DIV style="width: 28%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 60pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
</DIV>

<DIV align="center" style="font-size: 14pt;">
Common Stock
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10687y1068701.gif" alt="(BROOKDALE SENIOR LIVING LOGO)">
</DIV>

<DIV align="center" style="font-size: 18pt;">
<B>Brookdale Senior Living Inc.</B>
</DIV>

<DIV align="center" style="font-size: 16pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Goldman, Sachs&nbsp;&#38; Co.</B>
</DIV>

<DIV align="center" style="font-size: 16pt;">
<B>Lehman Brothers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 68pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 (25 days after the date of this prospectus) all dealers
that effect transactions in these securities, whether or not
participating in this offering may be required to deliver a
prospectus. This is in addition to the dealers&#146; obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.</B>
</DIV>

<DIV align="center" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

</FONT>

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<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Other Expenses of Issuance and Distribution</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the estimated fees and expenses
payable by the registrant in connection with the distribution of
the common stock:
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Securities and Exchange Commission
    registration fee
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">23,540</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">National Association of Securities
    Dealers, Inc. filing fee
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">20,500</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">NYSE listing fee
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Printing and engraving costs
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Legal fees and expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Accountants&#146; fees and expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Blue sky qualification fees and
    expenses
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Transfer agent fees
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Miscellaneous
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT face="helvetica,arial">Total
    </FONT></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><FONT face="helvetica,arial">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT face="helvetica,arial">*</FONT></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be furnished by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Indemnification of Directors and Officers</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;102 of the Delaware General Corporation Law, as
amended, or the DGCL, allows a corporation to eliminate the
personal liability of directors to a corporation or its
stockholders for monetary damages for a breach of a fiduciary
duty as a director, except where the director breached his duty
of loyalty, failed to act in good faith, engaged in intentional
misconduct or knowingly violated a law, authorized the payment
of a dividend or approved a stock repurchase or redemption in
violation of Delaware corporate law or obtained an improper
personal benefit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;145 of the DGCL provides, among other things, that
a corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (other than an action by or
in the right of the corporation) by reason of the fact that the
person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the corporation&#146;s
request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys&#146; fees,
judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with the action,
suit or proceeding. The power to indemnify applies if
(i)&nbsp;such person is successful on the merits or otherwise in
defense of any action, suit or proceeding or (ii)&nbsp;such
person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The power to indemnify applies to actions brought by
or in the right of the corporation as well, but only to the
extent of defense expenses (including attorneys&#146; fees but
excluding amounts paid in settlement) actually and reasonably
incurred and not to any satisfaction of judgment or settlement
of the claim itself, and with the further limitation that in
such actions no indemnification shall be made in the event of
any adjudication of negligence or misconduct in the performance
of his duties to the corporation, unless a court believes that
in light of all the circumstances indemnification should apply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;174 of the DGCL provides, among other things, that
a director who willfully and negligently approves of an unlawful
payment of dividends or an unlawful stock purchase or redemption
may be held liable for such actions. A director who was either
absent when the unlawful actions were approved or dissented at
the time, may avoid liability by causing his or her dissent to
such actions to be entered in the books containing the minutes
of the meetings of the board of
</DIV>

<P align="center" style="font-size: 10pt;">II-1

</FONT>

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<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt;">
directors at the time the action occurred or immediately after
the absent director receives notice of the unlawful acts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s amended and restated certificate of
incorporation states that no director shall be liable to us or
any of our stockholders for monetary damages for breach of
fiduciary duty as director, except for breaches of the duty of
loyalty, and for acts or omissions in bad faith or involving
intentional misconduct or knowing violation of law. A director
is also not exempt from liability for any transaction from which
he or she derived an improper personal benefit, or for
violations of Section&nbsp;174 of the DGCL. To the maximum
extent permitted under Section&nbsp;145 of the DGCL, our amended
and restated certificate of incorporation authorizes us to
indemnify any and all persons whom we have the power to
indemnify under the law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our amended and restated by-laws provide that the Company will
indemnify, to the fullest extent permitted by the DGCL, each
person who was or is made a party or is threatened to be made a
party in any legal proceeding by reason of the fact that he or
she is or was a director or officer of the Company or a
subsidiary. However, such indemnification is permitted only if
such person acted in good faith, lawfully and not against our
best interests. Indemnification is authorized on a case-by-case
basis by (1)&nbsp;our board of directors by a majority vote of
disinterested directors, (2)&nbsp;a committee of the
disinterested directors, (3)&nbsp;independent legal counsel in a
written opinion if (1)&nbsp;and (2)&nbsp;are not available, or
if disinterested directors so direct, or (4)&nbsp;the
stockholders. Indemnification of former directors or officers
shall be determined by any person authorized to act on the
matter on our behalf. Expenses incurred by a director or officer
in defending against such legal proceedings are payable before
the final disposition of the action, provided that the director
or officer undertakes to repay us if it is later determined that
he or she is not entitled to indemnification.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to completion of this offering, the Company intends to
enter into separate indemnification agreements with its
directors and officers. Each indemnification agreement will
provide, among other things, for indemnification to the fullest
extent permitted by law and our amended and restated certificate
of incorporation and amended and restated by-laws against any
and all expenses, judgments, fines, penalties and amounts paid
in settlement of any claim. The indemnification agreements will
provide for the advancement or payment of all expenses to the
indemnitee and for reimbursement to us if it is found that such
indemnitee is not entitled to such indemnification under
applicable law and our amended and restated certificate of
incorporation and amended and restated by-laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion
of the Commission, such indemnification is against public policy
as expressed in the Securities Act and is therefore
unenforceable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain directors&#146; and officers&#146; liability
insurance for our officers and directors.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Recent Sales of Unregistered Securities</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a summary of transactions by us involving sales
of our securities that were not registered under the Securities
Act during the last three years preceding the date of this
registration statement. Each of the following transactions were
private transactions entered into in connection with the
formation transactions described in &#147;Business&nbsp;&#151;
History&#148; and were exempt from registration under the
Securities Act by virtue of the exemption provided under
Section&nbsp;4(2) of the Securities Act. In &nbsp;2005:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    A wholly-owned subsidiary of ours merged with and into BLC. In
    the merger, the stockholders of BLC, including affiliates of
    Fortress, an affiliate of Capital&nbsp;Z Partners and certain
    members of our management, received an aggregate of
    20,000,000&nbsp;shares of our common stock, representing 34.5%
    of our outstanding common stock prior to this offering, for</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;">II-2

</FONT>
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<FONT face="helvetica,arial">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="1%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    all of their outstanding common stock of BLC. As a result of the
    merger, BLC became our wholly-owned subsidiary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Alterra purchased from Fortress Investment Trust&nbsp;II, an
    affiliate of Fortress, all of the outstanding membership
    interests of FIT REN, which had recently acquired certain senior
    living facilities from Prudential Financial, Inc., for an
    aggregate purchase price of approximately $282.4&nbsp;million
    (including the assumption of approximately $171.0&nbsp;million
    of debt). As a result of the purchase, FIT REN became a
    wholly-owned subsidiary of Alterra and Fortress Investment
    Trust&nbsp;II became a member of FEBC-ALT Investors LLC, or
    FEBC-ALT Investors, Alterra&#146;s indirect parent company. In
    connection with the merger of FEBC-ALT Investors described
    below, Fortress Investment Trust&nbsp;II received
    11,750,000&nbsp;shares of our common stock, representing 20.3%
    of our outstanding common stock prior to this offering, for its
    interest in FIT REN.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    A wholly-owned subsidiary of ours merged with and into FEBC-ALT
    Investors, Alterra&#146;s indirect parent company. In the
    merger, FIT-ALT Investor, Fortress Investment Trust&nbsp;II,
    Emeritus, NW Select and certain members of our management, each
    of which was a member of FEBC-ALT Investors, received an
    aggregate of 29,750,000&nbsp;shares of our common stock,
    representing 51.3% of our outstanding common stock prior to this
    offering, for all of the outstanding membership interests of
    FEBC-ALT Investors. FIT-ALT Investor LLC is an affiliate of
    Fortress. As a result of the merger, Alterra became our
    wholly-owned subsidiary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    A wholly-owned subsidiary of ours merged with and into Fortress
    CCRC. In the merger, Fortress Investment Trust&nbsp;II received
    an aggregate of 8,250,000 shares of our common stock,
    representing 14.2% of our outstanding common stock prior to this
    offering, for all of the outstanding membership interests of
    Fortress CCRC. Fortress CCRC owns, through its wholly-owned
    subsidiaries, seven senior living facilities, including one
    facility currently under contract for sale. As a result of the
    merger, Fortress CCRC became our wholly-owned subsidiary.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, on August&nbsp;5, 2005, BLC granted 988&nbsp;shares
of its stock and FEBC-ALT Investors granted 3.33% of its
membership interests, to certain members of our management,
which shares and percentage interests are subject to substantial
risk of forfeiture until the occurrence of certain events, as
specified in the applicable restricted stock or restricted
securities award agreements. In accordance with the terms of the
plans, a portion of these securities will no longer be subject
to a risk of forfeiture upon the consummation of this offering.
In addition, the remaining securities will vest over a five-year
period following the issuance if the executive remains
continuously employed by the Company. Securities that are
subject to a risk of forfeiture may not be sold or transferred.
See &#147;Business&nbsp;&#151; Equity Incentive
Plans&nbsp;&#151; Employee Restricted Stock Plans.&#148; In
connection with the merger transactions described in above,
these shares were automatically converted into an aggregate of
2,577,652&nbsp;shares of our common stock, representing 4.4% of
our outstanding common stock prior to this offering. These
grants were exempt from the registration requirements of the
Securities Act pursuant to Rule&nbsp;701.
</DIV>

<P align="center" style="font-size: 10pt;">II-3

</FONT>
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<FONT face="helvetica,arial">

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statement Schedules</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>A.</B></TD>
    <TD>
    <B>Exhibits</B></TD>
</TR>

</TABLE>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stock Purchase Agreement, dated
    June&nbsp;18, 2004, by and among Fortress Brookdale Acquisition
    LLC, Provident Senior Living Trust, and BLC Senior Holdings, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;1 to Stock
    Purchase Agreement dated August&nbsp;2, 2004, by and among
    Fortress Brookdale Acquisition LLC, Provident Senior Living
    Trust and BLC Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;2 to Stock
    Purchase Agreement dated October&nbsp;17, 2004, by and among
    Fortress Brookdale Acquisition LLC, Provident Senior Living
    Trust and BLC Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Asset Purchase Agreement, dated as
    of September&nbsp;3, 2004, by and among Fortress CCRC
    Acquisition LLC, as purchaser, Fortress Investment Fund&nbsp;II
    LLC, as guarantor, and The National Benevolent Association of
    the Christian Church (Disciples of Christ) and certain of its
    affiliated entities, as sellers.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement, dated
    March&nbsp;9, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress CCRC Acquisition LLC and Fortress Investment
    Fund&nbsp;II, LLC, regarding amendment of the Asset Purchase
    Agreement, dated as of September&nbsp;3, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement dated
    April&nbsp;6, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress CCRC Acquisition, LLC, and Fortress Investment
    Fund&nbsp;II, LLC, regarding Asset Purchase Agreement, dated as
    of September&nbsp;3, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement, dated
    April&nbsp;14, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress NBA Acquisition LLC, and Fortress Investment
    Fund&nbsp;II, LLC, regarding Asset Purchase Agreement, dated as
    of September&nbsp;3, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Supplemental Agreement with Respect
    to the Asset Purchase Agreement, dated as of September&nbsp;30,
    2004, by and among Fortress CCRC Acquisition LLC, Fortress
    Investment Fund&nbsp;II LLC, The National Benevolent Association
    of the Christian Church (Disciples of Christ) and certain of its
    affiliated entities and the Official Committee of Residents
    appointed in Chapter&nbsp;11 Case of The National Benevolent
    Association of the Christian Church (Disciples of Christ)
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Purchase and Sale Agreement, dated
    March&nbsp;16, 2005, by and among SHP Pacific Inn, LLC; SHP Nohl
    Ranch, LLC; SHP Gables, LLC; SHP Oak Tree Villa, LLC; SHP
    Lexington, LLC; SHP Inn at the Park, LLC; SHP Paulin Creek, LLC;
    SHP Mirage Inn, LLC; SHP Ocean House, LLC, as sellers, and FIT
    REN LLC, as purchaser
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Purchase and
    Sale Agreement, dated June&nbsp;10, 2005, by and between SHP
    Pacific Inn, LLC; SHP Nohl Ranch, LLC; SHP Gables, LLC; SHP Oak
    Tree Villa, LLC; SHP Lexington, LLC; SHP Inn at the Park, LLC;
    SHP Paulin Creek, LLC; SHP Mirage Inn, LLC; and SHP Ocean House,
    LLC, as seller, and FIT REN LLC, as buyer.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Stock Purchase
    Agreement, dated October&nbsp;19, 2004, between Alterra
    Healthcare Corporation and Provident Senior Living Trust,
    related to the Brookdale Tax Matters Agreement
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Purchase and Sale Agreement, dated
    as of February&nbsp;28, 2003, by and among ALS Venture&nbsp;II,
    Inc. and Wynwood of Chapel Hill LLC, as sellers, and SNH ALT
    Leased Properties Trust, as purchaser
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.6*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Membership Interest Purchase
    Agreement,
    dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, between Brookdale Development, LLC and Alliance Holdings,
    Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Membership Interest Purchase
    Agreement (Creve Coeur), dated as of March&nbsp;1, 2005, between
    Brookdale Development, LLC and DBF Consulting, LLC
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-4

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stock Purchase Agreement (Raleigh),
    dated as of March&nbsp;1, 2005, between Brookdale Development,
    LLC and DBF Consulting, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stock Purchase Agreement (Glen
    Ellyn), dated as of March&nbsp;1, 2005, between Brookdale
    Development, LLC and DBF Consulting, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Membership Interest Purchase
    Agreement (Trillium Place), dated as of March&nbsp;1, 2005,
    between Brookdale Development, LLC and DBF Consulting, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Membership Interest Purchase
    Agreement, dated June&nbsp;29, 2005, by and among NW Select LLC,
    Emeritus Corporation, FIT-ALT Investor LLC and Brookdale Senior
    Living Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.12*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Conveyance Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and among Brookdale Senior Living Inc., Brookdale
    Living Communities, Inc., BSL Brookdale Merger Inc., BSL CCRC
    Merger Inc., BSL FEBC Merger Inc., Emeritus Corporation,
    FEBC-ALT Investors LLC, FIT-ALT Investor LLC, Fortress CCRC
    Acquisition LLC, Fortress Investment Trust&nbsp;II, Fortress
    Registered Investment Trust, Fortress Brookdale Acquisition LLC,
    Health Partners and NW Select LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Certificate of
    Incorporation of the Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated By-laws of the
    Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Certificate for common stock
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stockholders Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, among Brookdale Senior Living Inc., Fortress Brookdale
    Acquisition LLC, Fortress Investment Trust&nbsp;II and Health
    Partners
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Governance Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, among Brookdale Senior Living Inc., Fortress Brookdale
    Acquisition LLC, Fortress Investment Trust&nbsp;II and Health
    Partners
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stockholders and Voting Agreement,
    dated as of June&nbsp;29, 2005, by and among Brookdale Senior
    Living Inc., FIT-ALT Investor LLC, Emeritus Corporation and NW
    Select LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Opinion of Skadden, Arps, Slate,
    Meagher&nbsp;&#38; Flom LLP relating to the validity of the
    common stock
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Agreement Regarding Leases, dated
    October&nbsp;19, 2004, by and between Brookdale Provident
    Properties, LLC and PSLT-BLC Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement, dated
    March&nbsp;28, 2005, regarding the Agreement Regarding Leases,
    dated October&nbsp;19, 2004, by and between Brookdale Provident
    Properties, LLC and PSLT-BLC Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Agreement Regarding
    Leases, dated October&nbsp;19, 2004, by Brookdale Living
    Communities, Inc., in favor of PSLT-BLC Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Tax Matters Agreement, dated as of
    June&nbsp;18, 2004, by and among Fortress Brookdale Acquisition
    LLC, Provident Senior Living Trust and Brookdale Living
    Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement, dated
    March&nbsp;28, 2005, amending the Tax Matters Agreement, dated
    as of June&nbsp;18, 2004, by and among Fortress Brookdale
    Acquisition LLC, Provident Senior Living Trust and Brookdale
    Living Communities, Inc., related to the Brookdale Agreement
    Regarding Leases
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease Agreement, dated
    January&nbsp;28, 2004, between Ventas Realty, Limited
    Partnership, BLC Adrian-GC, LLC, BLC Albuquerque-GC, LLC, BLC
    Dayton-GC, LLC and BLC Fort&nbsp;Myers-GC, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Master Lease
    Agreement, dated February&nbsp;20, 2004, by and between Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort&nbsp;Myers-GC,
    LLC; BLC Bristol-GC, LLC; and BLC Tavares-GC, LLC
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-5

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Second Amendment to Master Lease
    Agreement, dated March&nbsp;30, 2004, by and between Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort&nbsp;Myers-GC,
    LLC; BLC Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC,
    LLC; BLC Lubbock-GC, L.P.; and BLC Overland Park-GC, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Third Amendment to Master Lease
    Agreement, dated May&nbsp;13 2004, by and between Ventas Realty,
    Limited Partnership; BLC Adrian-GC, LLC; BLC Albuquerque-GC,
    LLC; BLC Dayton-GC, LLC; BLC Fort&nbsp;Myers-GC, LLC; BLC
    Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC, LLC; BLC
    Lubbock-GC, L.P.; BLC Overland Park-GC, LLC; and Brookdale
    Living Communities of Illinois-GV, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fourth Amendment to Master Lease
    Agreement, dated October&nbsp;19, 2004, by and among Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort&nbsp;Myers-GC,
    LLC; BLC Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC,
    LLC; BLC Lubbock-GC, L.P.; BLC Overland Park-GC, LLC; and
    Brookdale Living Communities of Illinois-GV, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fifth Amendment to Master Lease
    Agreement, dated May&nbsp;18, 2005, effective as of
    April&nbsp;30, 2005, by and between Ventas Realty, Limited
    Partnership, BLC Adrian-GC, LLC, BLC Albuquerque-GC, LLC, BLC
    Dayton-GC, LLC, BLC Fort&nbsp;Myers-GC, LLC, BLC Bristol-GC,
    LLC, BLC Tavares-GC, LLC, BLC Las Vegas-GC, LLC, BLC Lubbock-GC,
    L.P., BLC Overland Park-GC, LLC, Brookdale Living Communities Of
    Illinois-GV, LLC, BLC Belleville-GC, LLC, BLC Findlay-GC, LLC,
    and BLC Springfield-GC, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Property Lease Agreement
    with respect to the Provident-Brookdale properties
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Lease Guaranty with respect
    to the Provident-Brookdale properties
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Lease, dated as of
    January&nbsp;28, 2004, by Brookdale Living Communities, Inc.,
    for the benefit of Ventas Realty, Limited Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Guaranty of
    Lease, dated as of February&nbsp;20, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Second Amendment to Guaranty of
    Lease, dated as of February&nbsp;26, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Third Amendment to Guaranty of
    Lease, dated as of March&nbsp;10, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership and Ventas Kansas City&nbsp;I, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fourth Amendment to Guaranty of
    Lease, dated as of March&nbsp;30, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City&nbsp;I, LLC; Ventas Belleville,
    LLC; and Ventas Springfield/Findlay, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fifth Amendment to Guaranty of
    Lease, dated as of May&nbsp;13, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City&nbsp;I, LLC; Ventas Belleville,
    LLC; Ventas Farmington Hills, LLC; and Ventas
    Springfield/Findlay, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Sixth Amendment to Guaranty of
    Lease, dated as of June&nbsp;18, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City&nbsp;I, LLC; Ventas Belleville,
    LLC; Ventas Springfield/Findlay, LLC; and Ventas Farmington
    Hills, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Seventh Amendment to Guaranty of
    Lease, dated as of April&nbsp;30, 2005, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City&nbsp;I, LLC; Ventas Belleville,
    LLC; Ventas Springfield/Findlay, LLC; and Ventas Farmington
    Hills, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP Properties, Inc., BLC
    Properties&nbsp;I, LLC and, for certain limited purposes,
    Brookdale Management Holding, LLC
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-6

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Club Hill, LP, BLC-Club
    Hill, L.P. and, for certain limited purposes, Brookdale
    Management of Texas, L.P.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Roswell, LLC, BLC-Roswell,
    LLC and, for certain limited purposes, Brookdale Management-II,
    LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Pinecastle, LLC,
    BLC-Pinecastle, LLC and, for certain limited purposes, Brookdale
    Management-II, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Williamsburg, LLC,
    BLC-Williamsburg, LLC and, for certain limited purposes,
    Brookdale Management-II, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Montrose, LLC,
    BLC-Montrose, LLC and, for certain limited purposes, Brookdale
    Management&nbsp;&#151; Akron, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.14</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated as
    of May&nbsp;1, 2002, by and between CMCP&nbsp;&#151; Island
    Lake, LLC and BLC&nbsp;&#151; Island Lake, LLC and, for certain
    limited purposes, Brookdale Management-II, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.15</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Lease Guaranty, dated as of
    May&nbsp;1, 2002, by BLC Properties&nbsp;I, LLC in favor of
    CMCP-Roswell, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.16</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Indemnity and Guaranty Agreement,
    dated May&nbsp;1, 2002, by Capstead Mortgage Corporation,
    Brookdale Living Communities, Inc., BLC Properties&nbsp;I, LLC,
    BLC Island Lake, LLC, BLC- Windsong, LLC, BLC-Williamsburg, LLC,
    BLC-Montrose, LLC and BLC-Pinecastle, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.17</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Limited
    Liability Company Agreement of Brookdale Senior Housing, LLC,
    dated October&nbsp;19, 2004, among The Northwestern Mutual Life
    Insurance Company, AH Michigan Owner Limited Partnership, and AH
    Pennsylvania Owner Limited Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.18</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Agreement regarding
    Brookdale Senior Housing, LLC and related matters, dated
    September&nbsp;30, 2003, by and among The Northwestern Mutual
    Life Insurance Company, Brookdale Senior Housing, LLC, AH
    Michigan Owner Limited Partnership, AH Pennsylvania Owner
    Limited Partnership, AH Texas Owner Limited Partnership and
    Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.19</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guarantee, dated September&nbsp;30,
    2003, by Brookdale Living Communities, Inc. on behalf of AH
    Pennsylvania Owner Limited Partnership and AH Michigan Owner
    Limited Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.20</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guarantee, dated September&nbsp;30,
    2003, by AH Pennsylvania Owner Limited Partnership, in favor of
    Brookdale Senior Housing, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.21</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Southfield Guarantee of Recourse
    Obligations (Single Guarantor), dated September&nbsp;30, 2003,
    by Brookdale Living Communities, Inc. in connection with the
    loan made by Northwestern Mutual Life Insurance Company to
    Brookdale Senior Housing, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.22</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guarantee of Member Obligations,
    dated September&nbsp;30, 2003, among The Northwestern Mutual
    Life Insurance Company, AH Michigan Owner Limited Partnership,
    and AH Pennsylvania Owner Limited Partnership for Brookdale
    Senior Housing, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.23</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Devonshire First Open-End Mortgage
    and Security Agreement, dated September&nbsp;30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.24</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Devonshire Second Open-End Mortgage
    and Security Agreement, dated September&nbsp;30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Southfield First Mortgage and
    Security Agreement, dated September&nbsp;30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-7

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.26</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Southfield Second Mortgage and
    Security Agreement, dated September&nbsp;30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.27</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Gaines Ranch First Deed of Trust
    and Security Agreement, dated September&nbsp;30, 2003, between
    AH Texas Owner Limited Partnership, Henry F. Lange, and The
    Northwestern Mutual Life Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.28</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Gaines Ranch Second Deed of Trust
    and Security Agreement, dated September&nbsp;30, 2003, among AH
    Texas Owner Limited Partnership, Henry F. Lange, and Brookdale
    Senior Housing, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.29</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Gaines Ranch Third Deed of Trust
    and Security Agreement, dated September&nbsp;30, 2003, among AH
    Texas Owner Limited Partnership, Henry F. Lange and The
    Northwestern Mutual Life Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.30</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated
    March&nbsp;30, 2005, among AH Battery Park Owner, LLC, KG
    Missouri-CC Owner, LLC, AH Illinois Owner, LLC, AH North
    Carolina, Owner, LLC, AH Ohio-Columbus Owner, LLC, Guarantee
    Bank, GMAC Commercial Mortgage Corporation and GMAC Commercial
    Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty, dated March&nbsp;30,
    2005, among Brookdale Living Communities, Inc., Guarantee Bank,
    GMAC Commercial Mortgage Corporation and GMAC Commercial
    Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.32.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated
    October&nbsp;19, 2004, between LaSalle Bank National Association
    and Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.32.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;1 to Loan
    Agreement, dated March&nbsp;1, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.32.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;2 to Loan
    Agreement, dated March&nbsp;24, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.32.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;3 to Loan
    Agreement, dated May&nbsp;26, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.33</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Agreement for Management Services,
    dated July&nbsp;13, 2004, effective as of August&nbsp;1, 2004 by
    and between Cyprus Senior Management Services Limited
    Partnership and Brookdale Cyprus Management LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.34</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated as of
    April&nbsp;6, 2005, among General Electric Capital Corporation,
    Merrill Lynch Capital, FIT NBA Cypress Village LLC, FIT NBA
    Foxwood Springs LLC, FIT NBA Kansas Christian LLC, FIT NBA
    Patriot Heights LP, FIT NBA Ramsey LLC, FIT NBA Robin Run LP,
    and FIT NBA Skyline LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.35*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Agreement of Principal, by
    Brookdale Senior Living Inc. in favor of General Electric
    Capital Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.36</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated
    December&nbsp;31, 2004, by and between AHC Purchaser, Inc. and
    Merrill Lynch Capital
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.37</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty, dated as of
    December&nbsp;31, 2004, by Alterra Healthcare Corporation and
    AHC Purchaser Holding, Inc. for the benefit of Merrill Lynch
    Capital
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.38</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated as of
    December&nbsp;31, 2004, by and between AHC Purchaser
    Holding&nbsp;II, Inc. and Merrill Lynch Capital
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.39</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty, dated as of
    December&nbsp;31, 2004, by Alterra Healthcare Corporation for
    the benefit of Merrill Lynch Capital
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-8

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.40</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Cross-Collateralization,
    Cross-Default and Cross-Guaranty Agreement, dated May&nbsp;31,
    2005, among AHC Purchaser, Inc., AHC Purchaser Holding&nbsp;II,
    Inc., Alterra Healthcare Corp., Ithaca Bundy Tenant, Inc.,
    Ithaca Sterling Cottage Operator, Inc., Niagara Sterling Cottage
    Operator, Inc., Niagara Nash Tenant, Inc., and Clinton Sterling
    Cottage Operator, Inc., AHC Purchaser Holding, Inc. and
    Alternative Living Services&#151; New York, Inc., and Merrill
    Lynch Capital
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Master Lease
    Agreement, dated as of July&nbsp;1, 2001, by and among Health
    Care REIT, Inc.; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd. and
    Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to the Amended and
    Restated Master Lease Agreement, dated as of July&nbsp;16, 2001,
    by and among Health Care REIT, Inc.; HCRI North Carolina
    Properties, LLC; HCRI Tennessee Properties, Inc.; HCRI Texas
    Properties, Ltd. and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Second Amendment to the Amended and
    Restated Master Lease Agreement, dated as of December&nbsp;21,
    2001, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Third Amendment to the Amended and
    Restated Master Lease Agreement, dated as of March&nbsp;19,
    2002, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fourth Amendment to the Amended and
    Restated Master Lease Agreement, dated as of December&nbsp;27,
    2002, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fifth Amendment to Amended and
    Restated Master Lease Agreement, dated as of December&nbsp;4,
    2003, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Sixth Amendment to Amended and
    Restated Master Lease Agreement, dated as of June&nbsp;30, 2004,
    by and among Health Care REIT, Inc.; HCRI Indiana Properties,
    LLC; HCRI North Carolina Properties&nbsp;III, Limited
    Partnership; HCRI Tennessee Properties, Inc.; HCRI Texas
    Properties, Ltd.; HCRI Wisconsin Properties, LLC; and Alterra
    Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.42.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease, dated as of
    April&nbsp;9, 2002, by and between Alterra Healthcare
    Corporation and Nationwide Health Properties, Inc. and its
    affiliates
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.42.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Master Lease and
    Consent to Transfer, dated as of December&nbsp;2, 2003, by and
    among Alterra Healthcare Corporation; Nationwide Health
    Properties, Inc.; NH Texas Properties Limited Partnership; MLD
    Delaware trust; MLD Properties, LLC; NHP Silverwood Investments,
    Inc.; and NHP Westwood Investments, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.43.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease, dated as of
    April&nbsp;9, 2002, by and among JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, L.P., JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., ALS Leasing, Inc. and Assisted Living Properties, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.43.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Master Lease,
    Affirmation of Guaranty and Consent to Transfer, dated as of
    September&nbsp;12, 2003, by and among ALS Leasing, Inc.,
    Assisted Living Properties, Inc., JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, LP, JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-9

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

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<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.43.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Second Amendment to Master Lease,
    dated as of February&nbsp;23, 2004, by and among ALS Leasing,
    Inc., Assisted Living Properties, Inc., JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, LP, JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.44</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Lease and Letter of
    Credit Agreement dated as of April&nbsp;9, 2002 by and among
    Alterra Healthcare Corporation, JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, L.P., JER/NHP
    Senior Living Wisconsin, LLC, and JER/NHP Senior Living Kansas,
    Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.45.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease (Alterra Pool 2),
    dated as of October&nbsp;7, 2002, by and between JER/NHP Senior
    Living Acquisition, LLC and ALS Leasing, Inc
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.45.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Master Lease,
    Affirmation of Guaranty and Consent to Transfer, dated
    September&nbsp;12, 2003, by and among ALS Leasing, Inc., JER/NHP
    Senior Living Acquisition, LLC and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.46</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Lease and Letter of
    Credit Agreement, dated as of October&nbsp;7, 2002, by and
    between Alterra Healthcare Corporation and JER/NHP Senior Living
    Acquisition, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.47</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Lease, dated
    December&nbsp;15, 2002, between LTC-K1 Inc., as lessor and
    Alterra Healthcare Corporation, as lessee
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.48</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Lease, dated
    December&nbsp;15, 2002, between LTC-K2 Limited Partnership, as
    lessor and Alterra Healthcare Corporation, as lessee
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.49</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease Agreement, dated
    December&nbsp;15, 2002, between Kansas-LTC Corporation, as
    lessor, and Alterra Healthcare Corporation, as lessee
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease Agreement, dated
    December&nbsp;15, 2002 among LTC Properties, Inc., Texas-LTC
    Limited Partnership, and North Carolina Real Estate Investments,
    LLC, as lessor, and Alterra Healthcare Corporation, as lessee
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.51.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Lease Agreement, dated as of
    February&nbsp;28, 2003, by AHC Trailside, Inc. in favor of SNH
    ALT Leased Properties Trust
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.51.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Lease Agreement,
    dated as of December&nbsp;4, 2003, by and between AHC Trailside,
    Inc., and SNH ALT Leased Properties Trust
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.52.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty Agreement, dated as of
    February&nbsp;28, 2003, by Alterra Healthcare Corporation in
    favor of SNH ALT Leased Properties Trust
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.52.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Guaranty
    Agreement, dated as of December&nbsp;4, 2003, by Alterra
    Healthcare Corporation in favor of SNH ALT Leased Properties
    Trust
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.53</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Tri-Party Agreement, dated
    December&nbsp;4, 2003, by and among SNH ALT Mortgaged Properties
    Trust, SNH ALT Leased Properties Trust, FIT-ALT SNH Loan LLC,
    Pomacy Corporation, AHC Trailside, Inc., and Alterra Healthcare
    Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.54.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    October&nbsp;19, 2004, by and between PSLT-ALS
    Properties&nbsp;I, LLC, and ALS Properties Tenant I, LLC.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.54.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Property Lease
    Agreement, dated as of December&nbsp;16, 2004, by and between
    PSLT-ALS Properties&nbsp;II, LLC and ALS Properties
    Tenant&nbsp;II, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.55</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Sublease Agreement, dated
    October&nbsp;21, 2004, by and between ALS Properties
    Tenant&nbsp;I, LLC and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Agreement Regarding Leases, dated
    October&nbsp;20, 2004, by and between ALS Properties Holding
    Company, LLC and PSLT-ALS Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.57</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Agreement Regarding
    Leases, dated October&nbsp;20, 2004, by Alterra Healthcare
    Corporation in favor of PSLT-ALS Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Property Lease Agreement
    with respect to the Provident-Alterra properties
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.59</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Lease Guaranty with respect
    to the Provident-Alterra Properties
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.60.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Park&nbsp;LP,
    as borrower, to Fidelity National Title Company, as trustee, for
    the benefit of GMAC Commercial Mortgage Bank, as lender
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-10

</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.60.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $22,545,000, dated June&nbsp;21, 2005, from FIT REN
    Park,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.60.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.61.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Nohl
    Ranch&nbsp;LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.61.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $7,920,000, dated June&nbsp;21, 2005, from FIT REN Nohl
    Ranch,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.61.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.62.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Mirage
    Inn&nbsp;LP, as borrower, to Fidelity National Title Company, as
    trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.62.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $15,000,000, dated June&nbsp;21, 2005, from FIT REN Mirage Inn,
    LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.62.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.63.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Pacific
    Inn&nbsp;LP, as borrower, to Fidelity National Title Company, as
    trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.63.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $25,775,000, dated June&nbsp;21, 2005, from FIT REN Pacific Inn,
    LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.63.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.64.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN The
    Gables&nbsp;LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.64.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $5,255,000, dated June&nbsp;21, 2005, from FIT REN The
    Gables,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.64.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.65.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN The
    Lexington&nbsp;LP, as borrower, to Fidelity National Title
    Company, as trustee, for the benefit of GMAC Commercial Mortgage
    Bank, as lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.65.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $10,867,974.00, dated June&nbsp;21, 2005 from FIT REN The
    Lexington,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.65.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.66.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Oak
    Tree&nbsp;LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.66.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $23,305,026, dated June&nbsp;21, 2005, from FIT REN Oak
    Tree,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-11

</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.66.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.67.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Paulin
    Creek&nbsp;LP, as borrower, to Fidelity National
    Title&nbsp;Company, as trustee, for the benefit of GMAC
    Commercial Mortgage Bank, as lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.67.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $40,732,000, dated June&nbsp;21, 2005, from FIT REN Paulin
    Creek, LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.67.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.68.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated July&nbsp;22, 2005, by FIT REN Ocean House
    LP, as borrower, to Fidelity National Title Company, as trustee,
    for the benefit of GMAC Commercial Mortgage Bank, as lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.68.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $19,600,000, dated July&nbsp;22, 2005, from FIT REN Ocean House,
    LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.68.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated July&nbsp;22, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">21</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Subsidiaries of the registrant
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Consent of Skadden, Arps, Slate,
    Meagher&nbsp;&#38; Flom LLP (included in Exhibit&nbsp;5.1)
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Consent of Ernst&nbsp;&#38; Young
    LLP
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Consent of KPMG LLP
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Powers of Attorney (included on the
    signature pages hereto)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>B.</B></TD>
    <TD>
    <B>Financial Statement Schedules</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
See Schedule&nbsp;II&nbsp;&#151; Valuation and Qualification
Accounts, included in the Combined Financial Statements in
Part&nbsp;I of this Registration Statement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B><I>Undertakings</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(1)&nbsp;Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by
a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is
asserted against the registrant by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the
final adjudication of such issue.
</DIV>

<P align="center" style="font-size: 10pt;">II-12

</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(2)&nbsp;The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (a)&nbsp;For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this Registration Statement in
    reliance upon Rule&nbsp;430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities
    Act shall be deemed to be part of this Registration Statement as
    of the time it was declared effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (b)&nbsp;For the purpose of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new Registration
    Statement relating to the securities offered therein, and this
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(3)&nbsp;The undersigned hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery thereof.
</DIV>

<P align="center" style="font-size: 10pt;">II-13

</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this Registration
Statement on Form&nbsp;S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois, on August&nbsp;9, 2005.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    BROOKDALE SENIOR LIVING INC.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ <FONT style="font-variant:SMALL-CAPS">Mark J. Schulte
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Name:&nbsp;Mark J. Schulte</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="8%"></TD>
    <TD width="52%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>Title:</TD>
    <TD align="left">
    Chief Executive Officer</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>POWER OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In accordance with the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed by
the following persons in the capacities and on the dates stated.
Each person whose signature appears below constitutes and
appoints Wesley R. Edens, Mark J. Schulte, R. Stanley Young and
Deborah C. Paskin and each of them severally, as his or her true
and lawful attorney-in-fact and agent, each acting along with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any or all amendments (including
post-effective amendments) and exhibits to the Registration
Statement on Form&nbsp;S-1, and to any registration statement
filed under Commission Rule&nbsp;462, and to file the same, with
all exhibits thereto, and all documents in connection therewith,
with the Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Signature</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Title</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Date</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT face="helvetica,arial">/s/
    <FONT style="font-variant:SMALL-CAPS">Wesley R. Edens<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT></FONT><FONT face="helvetica,arial">Wesley
    R. Edens
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">Chairman of the Board
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">August&nbsp;9, 2005
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT face="helvetica,arial">/s/
    <FONT style="font-variant:SMALL-CAPS">Mark J. Schulte<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT></FONT><FONT face="helvetica,arial">Mark
    J. Schulte
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">Chief Executive Officer
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">August&nbsp;9, 2005
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT face="helvetica,arial">/s/
    <FONT style="font-variant:SMALL-CAPS">R. Stanley Young<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT></FONT><FONT face="helvetica,arial">R.
    Stanley Young
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">Executive Vice President and Chief
    Financial Officer
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">August&nbsp;9, 2005
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT face="helvetica,arial">/s/
    <FONT style="font-variant:SMALL-CAPS">Randal A. Nardone<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT></FONT><FONT face="helvetica,arial">Randal
    A. Nardone
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">Director
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">August&nbsp;9, 2005
    </FONT></TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT face="helvetica,arial">/s/
    <FONT style="font-variant:SMALL-CAPS">William B. Doniger<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV></FONT></FONT><FONT face="helvetica,arial">William
    B. Doniger
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">Director
    </FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <FONT face="helvetica,arial">August&nbsp;9, 2005
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-14

</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEX TO EXHIBITS</B>
</DIV>
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">1</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stock Purchase Agreement, dated
    June&nbsp;18, 2004, by and among Fortress Brookdale Acquisition
    LLC, Provident Senior Living Trust, and BLC Senior Holdings, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;1 to Stock
    Purchase Agreement dated August&nbsp;2, 2004, by and among
    Fortress Brookdale Acquisition LLC, Provident Senior Living
    Trust and BLC Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;2 to Stock
    Purchase Agreement dated October&nbsp;17, 2004, by and among
    Fortress Brookdale Acquisition LLC, Provident Senior Living
    Trust and BLC Holdings Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Asset Purchase Agreement, dated as
    of September&nbsp;3, 2004, by and among Fortress CCRC
    Acquisition LLC, as purchaser, Fortress Investment Fund&nbsp;II
    LLC, as guarantor, and The National Benevolent Association of
    the Christian Church (Disciples of Christ) and certain of its
    affiliated entities, as sellers.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement, dated
    March&nbsp;9, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress CCRC Acquisition LLC and Fortress Investment
    Fund&nbsp;II, LLC, regarding amendment of the Asset Purchase
    Agreement, dated as of September&nbsp;3, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement dated
    April&nbsp;6, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress CCRC Acquisition, LLC, and Fortress Investment
    Fund&nbsp;II, LLC, regarding Asset Purchase Agreement, dated as
    of September&nbsp;3, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement, dated
    April&nbsp;14, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress NBA Acquisition LLC, and Fortress Investment
    Fund&nbsp;II, LLC, regarding Asset Purchase Agreement, dated as
    of September&nbsp;3, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Supplemental Agreement with Respect
    to the Asset Purchase Agreement, dated as of September&nbsp;30,
    2004, by and among Fortress CCRC Acquisition LLC, Fortress
    Investment Fund&nbsp;II LLC, The National Benevolent Association
    of the Christian Church (Disciples of Christ) and certain of its
    affiliated entities and the Official Committee of Residents
    appointed in Chapter&nbsp;11 Case of The National Benevolent
    Association of the Christian Church (Disciples of Christ)
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Purchase and Sale Agreement, dated
    March&nbsp;16, 2005, by and among SHP Pacific Inn, LLC; SHP Nohl
    Ranch, LLC; SHP Gables, LLC; SHP Oak Tree Villa, LLC; SHP
    Lexington, LLC; SHP Inn at the Park, LLC; SHP Paulin Creek, LLC;
    SHP Mirage Inn, LLC; SHP Ocean House, LLC, as sellers, and FIT
    REN LLC, as purchaser
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Purchase and
    Sale Agreement, dated June&nbsp;10, 2005, by and between SHP
    Pacific Inn, LLC; SHP Nohl Ranch, LLC; SHP Gables, LLC; SHP Oak
    Tree Villa, LLC; SHP Lexington, LLC; SHP Inn at the Park, LLC;
    SHP Paulin Creek, LLC; SHP Mirage Inn, LLC; and SHP Ocean House,
    LLC, as seller, and FIT REN LLC, as buyer.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Stock Purchase
    Agreement, dated October&nbsp;19, 2004, between Alterra
    Healthcare Corporation and Provident Senior Living Trust,
    related to the Brookdale Tax Matters Agreement
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Purchase and Sale Agreement, dated
    as of February&nbsp;28, 2003, by and among ALS Venture&nbsp;II,
    Inc. and Wynwood of Chapel Hill LLC, as sellers, and SNH ALT
    Leased Properties Trust, as purchaser
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.6*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Membership Interest Purchase
    Agreement,
    dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, between Brookdale Development, LLC and Alliance Holdings,
    Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Membership Interest Purchase
    Agreement (Creve Coeur), dated as of March&nbsp;1, 2005, between
    Brookdale Development, LLC and DBF Consulting, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stock Purchase Agreement (Raleigh),
    dated as of March&nbsp;1, 2005, between Brookdale Development,
    LLC and DBF Consulting, LLC
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-15

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stock Purchase Agreement (Glen
    Ellyn), dated as of March&nbsp;1, 2005, between Brookdale
    Development, LLC and DBF Consulting, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Membership Interest Purchase
    Agreement (Trillium Place), dated as of March&nbsp;1, 2005,
    between Brookdale Development, LLC and DBF Consulting, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Membership Interest Purchase
    Agreement, dated June&nbsp;29, 2005, by and among NW Select LLC,
    Emeritus Corporation, FIT-ALT Investor LLC and Brookdale Senior
    Living Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">2</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.12*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Conveyance Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, by and among Brookdale Senior Living Inc., Brookdale
    Living Communities, Inc., BSL Brookdale Merger Inc., BSL CCRC
    Merger Inc., BSL FEBC Merger Inc., Emeritus Corporation,
    FEBC-ALT Investors LLC, FIT-ALT Investor LLC, Fortress CCRC
    Acquisition LLC, Fortress Investment Trust&nbsp;II, Fortress
    Registered Investment Trust, Fortress Brookdale Acquisition LLC,
    Health Partners and NW Select LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Certificate of
    Incorporation of the Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">3</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated By-laws of the
    Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Certificate for common stock
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stockholders Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, among Brookdale Senior Living Inc., Fortress Brookdale
    Acquisition LLC, Fortress Investment Trust&nbsp;II and Health
    Partners
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Governance Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2005, among Brookdale Senior Living Inc., Fortress Brookdale
    Acquisition LLC, Fortress Investment Trust&nbsp;II and Health
    Partners
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">4</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Stockholders and Voting Agreement,
    dated as of June&nbsp;29, 2005, by and among Brookdale Senior
    Living Inc., FIT-ALT Investor LLC, Emeritus Corporation and NW
    Select LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">5</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Opinion of Skadden, Arps, Slate,
    Meagher&nbsp;&#38; Flom LLP relating to the validity of the
    common stock
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Agreement Regarding Leases, dated
    October&nbsp;19, 2004, by and between Brookdale Provident
    Properties, LLC and PSLT-BLC Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement, dated
    March&nbsp;28, 2005, regarding the Agreement Regarding Leases,
    dated October&nbsp;19, 2004, by and between Brookdale Provident
    Properties, LLC and PSLT-BLC Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Agreement Regarding
    Leases, dated October&nbsp;19, 2004, by Brookdale Living
    Communities, Inc., in favor of PSLT-BLC Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Tax Matters Agreement, dated as of
    June&nbsp;18, 2004, by and among Fortress Brookdale Acquisition
    LLC, Provident Senior Living Trust and Brookdale Living
    Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Letter Agreement, dated
    March&nbsp;28, 2005, amending the Tax Matters Agreement, dated
    as of June&nbsp;18, 2004, by and among Fortress Brookdale
    Acquisition LLC, Provident Senior Living Trust and Brookdale
    Living Communities, Inc., related to the Brookdale Agreement
    Regarding Leases
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease Agreement, dated
    January&nbsp;28, 2004, between Ventas Realty, Limited
    Partnership, BLC Adrian-GC, LLC, BLC Albuquerque-GC, LLC, BLC
    Dayton-GC, LLC and BLC Fort&nbsp;Myers-GC, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Master Lease
    Agreement, dated February&nbsp;20, 2004, by and between Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort&nbsp;Myers-GC,
    LLC; BLC Bristol-GC, LLC; and BLC Tavares-GC, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Second Amendment to Master Lease
    Agreement, dated March&nbsp;30, 2004, by and between Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort&nbsp;Myers-GC,
    LLC; BLC Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC,
    LLC; BLC Lubbock-GC, L.P.; and BLC Overland Park-GC, LLC
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-16

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Third Amendment to Master Lease
    Agreement, dated May&nbsp;13 2004, by and between Ventas Realty,
    Limited Partnership; BLC Adrian-GC, LLC; BLC Albuquerque-GC,
    LLC; BLC Dayton-GC, LLC; BLC Fort&nbsp;Myers-GC, LLC; BLC
    Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC, LLC; BLC
    Lubbock-GC, L.P.; BLC Overland Park-GC, LLC; and Brookdale
    Living Communities of Illinois-GV, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fourth Amendment to Master Lease
    Agreement, dated October&nbsp;19, 2004, by and among Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort&nbsp;Myers-GC,
    LLC; BLC Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC,
    LLC; BLC Lubbock-GC, L.P.; BLC Overland Park-GC, LLC; and
    Brookdale Living Communities of Illinois-GV, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.4.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fifth Amendment to Master Lease
    Agreement, dated May&nbsp;18, 2005, effective as of
    April&nbsp;30, 2005, by and between Ventas Realty, Limited
    Partnership, BLC Adrian-GC, LLC, BLC Albuquerque-GC, LLC, BLC
    Dayton-GC, LLC, BLC Fort&nbsp;Myers-GC, LLC, BLC Bristol-GC,
    LLC, BLC Tavares-GC, LLC, BLC Las Vegas-GC, LLC, BLC Lubbock-GC,
    L.P., BLC Overland Park-GC, LLC, Brookdale Living Communities Of
    Illinois-GV, LLC, BLC Belleville-GC, LLC, BLC Findlay-GC, LLC,
    and BLC Springfield-GC, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Property Lease Agreement
    with respect to the Provident-Brookdale properties
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Lease Guaranty with respect
    to the Provident-Brookdale properties
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Lease, dated as of
    January&nbsp;28, 2004, by Brookdale Living Communities, Inc.,
    for the benefit of Ventas Realty, Limited Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Guaranty of
    Lease, dated as of February&nbsp;20, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Second Amendment to Guaranty of
    Lease, dated as of February&nbsp;26, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Third Amendment to Guaranty of
    Lease, dated as of March&nbsp;10, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership and Ventas Kansas City&nbsp;I, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fourth Amendment to Guaranty of
    Lease, dated as of March&nbsp;30, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City&nbsp;I, LLC; Ventas Belleville,
    LLC; and Ventas Springfield/Findlay, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fifth Amendment to Guaranty of
    Lease, dated as of May&nbsp;13, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City&nbsp;I, LLC; Ventas Belleville,
    LLC; Ventas Farmington Hills, LLC; and Ventas
    Springfield/Findlay, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Sixth Amendment to Guaranty of
    Lease, dated as of June&nbsp;18, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City&nbsp;I, LLC; Ventas Belleville,
    LLC; Ventas Springfield/Findlay, LLC; and Ventas Farmington
    Hills, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.7.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Seventh Amendment to Guaranty of
    Lease, dated as of April&nbsp;30, 2005, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City&nbsp;I, LLC; Ventas Belleville,
    LLC; Ventas Springfield/Findlay, LLC; and Ventas Farmington
    Hills, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP Properties, Inc., BLC
    Properties&nbsp;I, LLC and, for certain limited purposes,
    Brookdale Management Holding, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.9</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Club Hill, LP, BLC-Club
    Hill, L.P. and, for certain limited purposes, Brookdale
    Management of Texas, L.P.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Roswell, LLC, BLC-Roswell,
    LLC and, for certain limited purposes, Brookdale Management-II,
    LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Pinecastle, LLC,
    BLC-Pinecastle, LLC and, for certain limited purposes, Brookdale
    Management-II, LLC
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-17

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.12</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Williamsburg, LLC,
    BLC-Williamsburg, LLC and, for certain limited purposes,
    Brookdale Management-II, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    May&nbsp;1, 2002, by and between CMCP-Montrose, LLC,
    BLC-Montrose, LLC and, for certain limited purposes, Brookdale
    Management&nbsp;&#151; Akron, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.14</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated as
    of May&nbsp;1, 2002, by and between CMCP&nbsp;&#151; Island
    Lake, LLC and BLC&nbsp;&#151; Island Lake, LLC and, for certain
    limited purposes, Brookdale Management-II, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.15</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Lease Guaranty, dated as of
    May&nbsp;1, 2002, by BLC Properties&nbsp;I, LLC in favor of
    CMCP-Roswell, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.16</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Indemnity and Guaranty Agreement,
    dated May&nbsp;1, 2002, by Capstead Mortgage Corporation,
    Brookdale Living Communities, Inc., BLC Properties&nbsp;I, LLC,
    BLC Island Lake, LLC, BLC- Windsong, LLC, BLC-Williamsburg, LLC,
    BLC-Montrose, LLC and BLC-Pinecastle, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.17</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Limited
    Liability Company Agreement of Brookdale Senior Housing, LLC,
    dated October&nbsp;19, 2004, among The Northwestern Mutual Life
    Insurance Company, AH Michigan Owner Limited Partnership, and AH
    Pennsylvania Owner Limited Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.18</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Agreement regarding
    Brookdale Senior Housing, LLC and related matters, dated
    September&nbsp;30, 2003, by and among The Northwestern Mutual
    Life Insurance Company, Brookdale Senior Housing, LLC, AH
    Michigan Owner Limited Partnership, AH Pennsylvania Owner
    Limited Partnership, AH Texas Owner Limited Partnership and
    Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.19</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guarantee, dated September&nbsp;30,
    2003, by Brookdale Living Communities, Inc. on behalf of AH
    Pennsylvania Owner Limited Partnership and AH Michigan Owner
    Limited Partnership
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.20</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guarantee, dated September&nbsp;30,
    2003, by AH Pennsylvania Owner Limited Partnership, in favor of
    Brookdale Senior Housing, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.21</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Southfield Guarantee of Recourse
    Obligations (Single Guarantor), dated September&nbsp;30, 2003,
    by Brookdale Living Communities, Inc. in connection with the
    loan made by Northwestern Mutual Life Insurance Company to
    Brookdale Senior Housing, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.22</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guarantee of Member Obligations,
    dated September&nbsp;30, 2003, among The Northwestern Mutual
    Life Insurance Company, AH Michigan Owner Limited Partnership,
    and AH Pennsylvania Owner Limited Partnership for Brookdale
    Senior Housing, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.23</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Devonshire First Open-End Mortgage
    and Security Agreement, dated September&nbsp;30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.24</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Devonshire Second Open-End Mortgage
    and Security Agreement, dated September&nbsp;30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Southfield First Mortgage and
    Security Agreement, dated September&nbsp;30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.26</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Southfield Second Mortgage and
    Security Agreement, dated September&nbsp;30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.27</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Gaines Ranch First Deed of Trust
    and Security Agreement, dated September&nbsp;30, 2003, between
    AH Texas Owner Limited Partnership, Henry F. Lange, and The
    Northwestern Mutual Life Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.28</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Gaines Ranch Second Deed of Trust
    and Security Agreement, dated September&nbsp;30, 2003, among AH
    Texas Owner Limited Partnership, Henry F. Lange, and Brookdale
    Senior Housing, LLC
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-18

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.29</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Gaines Ranch Third Deed of Trust
    and Security Agreement, dated September&nbsp;30, 2003, among AH
    Texas Owner Limited Partnership, Henry F. Lange and The
    Northwestern Mutual Life Insurance Company
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.30</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated
    March&nbsp;30, 2005, among AH Battery Park Owner, LLC, KG
    Missouri-CC Owner, LLC, AH Illinois Owner, LLC, AH North
    Carolina, Owner, LLC, AH Ohio-Columbus Owner, LLC, Guarantee
    Bank, GMAC Commercial Mortgage Corporation and GMAC Commercial
    Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.31</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty, dated March&nbsp;30,
    2005, among Brookdale Living Communities, Inc., Guarantee Bank,
    GMAC Commercial Mortgage Corporation and GMAC Commercial
    Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.32.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated
    October&nbsp;19, 2004, between LaSalle Bank National Association
    and Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.32.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;1 to Loan
    Agreement, dated March&nbsp;1, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.32.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;2 to Loan
    Agreement, dated March&nbsp;24, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.32.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amendment No.&nbsp;3 to Loan
    Agreement, dated May&nbsp;26, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.33</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Agreement for Management Services,
    dated July&nbsp;13, 2004, effective as of August&nbsp;1, 2004 by
    and between Cyprus Senior Management Services Limited
    Partnership and Brookdale Cyprus Management LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.34</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated as of
    April&nbsp;6, 2005, among General Electric Capital Corporation,
    Merrill Lynch Capital, FIT NBA Cypress Village LLC, FIT NBA
    Foxwood Springs LLC, FIT NBA Kansas Christian LLC, FIT NBA
    Patriot Heights&nbsp;LP, FIT NBA Ramsey LLC, FIT NBA Robin Run
    LP, and FIT NBA Skyline LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.35*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Agreement of Principal, by
    Brookdale Senior Living Inc. in favor of General Electric
    Capital Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.36</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated
    December&nbsp;31, 2004, by and between AHC Purchaser, Inc. and
    Merrill Lynch Capital
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.37</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty, dated as of
    December&nbsp;31, 2004, by Alterra Healthcare Corporation and
    AHC Purchaser Holding, Inc. for the benefit of Merrill Lynch
    Capital
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.38</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Loan Agreement, dated as of
    December&nbsp;31, 2004, by and between AHC Purchaser
    Holding&nbsp;II, Inc. and Merrill Lynch Capital
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.39</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty, dated as of
    December&nbsp;31, 2004, by Alterra Healthcare Corporation for
    the benefit of Merrill Lynch Capital
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.40</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Cross-Collateralization,
    Cross-Default and Cross-Guaranty Agreement, dated May&nbsp;31,
    2005, among AHC Purchaser, Inc., AHC Purchaser Holding&nbsp;II,
    Inc., Alterra Healthcare Corp., Ithaca Bundy Tenant, Inc.,
    Ithaca Sterling Cottage Operator, Inc., Niagara Sterling Cottage
    Operator, Inc., Niagara Nash Tenant, Inc., and Clinton Sterling
    Cottage Operator, Inc., AHC Purchaser Holding, Inc. and
    Alternative Living Services&#151; New York, Inc., and Merrill
    Lynch Capital
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Master Lease
    Agreement, dated as of July&nbsp;1, 2001, by and among Health
    Care REIT, Inc.; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd. and
    Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to the Amended and
    Restated Master Lease Agreement, dated as of July&nbsp;16, 2001,
    by and among Health Care REIT, Inc.; HCRI North Carolina
    Properties, LLC; HCRI Tennessee Properties, Inc.; HCRI Texas
    Properties, Ltd. and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Second Amendment to the Amended and
    Restated Master Lease Agreement, dated as of December&nbsp;21,
    2001, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-19

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Third Amendment to the Amended and
    Restated Master Lease Agreement, dated as of March&nbsp;19,
    2002, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.5</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fourth Amendment to the Amended and
    Restated Master Lease Agreement, dated as of December&nbsp;27,
    2002, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Fifth Amendment to Amended and
    Restated Master Lease Agreement, dated as of December&nbsp;4,
    2003, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.41.7</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Sixth Amendment to Amended and
    Restated Master Lease Agreement, dated as of June&nbsp;30, 2004,
    by and among Health Care REIT, Inc.; HCRI Indiana Properties,
    LLC; HCRI North Carolina Properties&nbsp;III, Limited
    Partnership; HCRI Tennessee Properties, Inc.; HCRI Texas
    Properties, Ltd.; HCRI Wisconsin Properties, LLC; and Alterra
    Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.42.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease, dated as of
    April&nbsp;9, 2002, by and between Alterra Healthcare
    Corporation and Nationwide Health Properties, Inc. and its
    affiliates
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.42.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Master Lease and
    Consent to Transfer, dated as of December&nbsp;2, 2003, by and
    among Alterra Healthcare Corporation; Nationwide Health
    Properties, Inc.; NH Texas Properties Limited Partnership; MLD
    Delaware trust; MLD Properties, LLC; NHP Silverwood Investments,
    Inc.; and NHP Westwood Investments, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.43.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease, dated as of
    April&nbsp;9, 2002, by and among JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, L.P., JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., ALS Leasing, Inc. and Assisted Living Properties, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.43.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Master Lease,
    Affirmation of Guaranty and Consent to Transfer, dated as of
    September&nbsp;12, 2003, by and among ALS Leasing, Inc.,
    Assisted Living Properties, Inc., JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, LP, JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.43.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Second Amendment to Master Lease,
    dated as of February&nbsp;23, 2004, by and among ALS Leasing,
    Inc., Assisted Living Properties, Inc., JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, LP, JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.44</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Lease and Letter of
    Credit Agreement dated as of April&nbsp;9, 2002 by and among
    Alterra Healthcare Corporation, JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, L.P., JER/NHP
    Senior Living Wisconsin, LLC, and JER/NHP Senior Living Kansas,
    Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.45.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease (Alterra Pool 2),
    dated as of October&nbsp;7, 2002, by and between JER/NHP Senior
    Living Acquisition, LLC and ALS Leasing, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.45.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Master Lease,
    Affirmation of Guaranty and Consent to Transfer, dated
    September&nbsp;12, 2003, by and among ALS Leasing, Inc., JER/NHP
    Senior Living Acquisition, LLC and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.46</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Lease and Letter of
    Credit Agreement, dated as of October&nbsp;7, 2002, by and
    between Alterra Healthcare Corporation and JER/NHP Senior Living
    Acquisition, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.47</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Lease, dated
    December&nbsp;15, 2002, between LTC-K1 Inc., as lessor and
    Alterra Healthcare Corporation, as lessee
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.48</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Lease, dated
    December&nbsp;15, 2002, between LTC-K2 Limited Partnership, as
    lessor and Alterra Healthcare Corporation, as lessee
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-20

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.49</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease Agreement, dated
    December&nbsp;15, 2002, between Kansas-LTC Corporation, as
    lessor, and Alterra Healthcare Corporation, as lessee
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.50</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Master Lease Agreement, dated
    December&nbsp;15, 2002 among LTC Properties, Inc., Texas-LTC
    Limited Partnership, and North Carolina Real Estate Investments,
    LLC, as lessor, and Alterra Healthcare Corporation, as lessee
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.51.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Lease Agreement, dated as of
    February&nbsp;28, 2003, by AHC Trailside, Inc. in favor of SNH
    ALT Leased Properties Trust
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.51.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Lease Agreement,
    dated as of December&nbsp;4, 2003, by and between AHC Trailside,
    Inc., and SNH ALT Leased Properties Trust
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.52.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty Agreement, dated as of
    February&nbsp;28, 2003, by Alterra Healthcare Corporation in
    favor of SNH ALT Leased Properties Trust
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.52.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">First Amendment to Guaranty
    Agreement, dated as of December&nbsp;4, 2003, by Alterra
    Healthcare Corporation in favor of SNH ALT Leased Properties
    Trust
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.53</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Tri-Party Agreement, dated
    December&nbsp;4, 2003, by and among SNH ALT Mortgaged Properties
    Trust, SNH ALT Leased Properties Trust, FIT-ALT SNH Loan LLC,
    Pomacy Corporation, AHC Trailside, Inc., and Alterra Healthcare
    Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.54.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Property Lease Agreement, dated
    October&nbsp;19, 2004, by and between PSLT-ALS
    Properties&nbsp;I, LLC, and ALS Properties Tenant&nbsp;I, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.54.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Amended and Restated Property Lease
    Agreement, dated as of December&nbsp;16, 2004, by and between
    PSLT-ALS Properties&nbsp;II, LLC and ALS Properties
    Tenant&nbsp;II, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.55</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Sublease Agreement, dated
    October&nbsp;21, 2004, by and between ALS Properties
    Tenant&nbsp;I, LLC and Alterra Healthcare Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.56</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Agreement Regarding Leases, dated
    October&nbsp;20, 2004, by and between ALS Properties Holding
    Company, LLC and PSLT-ALS Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.57</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Guaranty of Agreement Regarding
    Leases, dated October&nbsp;20, 2004, by Alterra Healthcare
    Corporation in favor of PSLT-ALS Properties Holdings, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.58</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Property Lease Agreement
    with respect to the Provident-Alterra properties
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.59</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Form of Lease Guaranty with respect
    to the Provident-Alterra Properties
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.60.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Park&nbsp;LP,
    as borrower, to Fidelity National Title Company, as trustee, for
    the benefit of GMAC Commercial Mortgage Bank, as lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.60.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $22,545,000, dated June&nbsp;21, 2005, from FIT REN
    Park,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.60.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.61.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Nohl
    Ranch&nbsp;LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.61.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $7,920,000, dated June&nbsp;21, 2005, from FIT REN Nohl
    Ranch,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.61.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.62.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Mirage
    Inn&nbsp;LP, as borrower, to Fidelity National Title Company, as
    trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.62.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $15,000,000, dated June&nbsp;21, 2005, from FIT REN Mirage Inn,
    LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.62.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-21

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.63.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Pacific
    Inn&nbsp;LP, as borrower, to Fidelity National Title Company, as
    trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.63.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $25,775,000, dated June&nbsp;21, 2005, from FIT REN Pacific Inn,
    LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.63.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.64.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN The
    Gables&nbsp;LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.64.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $5,255,000, dated June&nbsp;21, 2005, from FIT REN The
    Gables,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.64.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.65.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN The
    Lexington&nbsp;LP, as borrower, to Fidelity National Title
    Company, as trustee, for the benefit of GMAC Commercial Mortgage
    Bank, as lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.65.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $10,867,974.00, dated June&nbsp;21, 2005 from FIT REN The
    Lexington,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.65.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.66.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Oak
    Tree&nbsp;LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.66.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $23,305,026, dated June&nbsp;21, 2005, from FIT REN Oak
    Tree,&nbsp;LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.66.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.67.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June&nbsp;21, 2005, by FIT REN Paulin
    Creek&nbsp;LP, as borrower, to Fidelity National
    Title&nbsp;Company, as trustee, for the benefit of GMAC
    Commercial Mortgage Bank, as lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.67.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $40,732,000, dated June&nbsp;21, 2005, from FIT REN Paulin
    Creek, LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.67.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated June&nbsp;21, 2005, by Fortress Investment
    Trust&nbsp;II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.68.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated July 22, 2005, by FIT REN Ocean House LP, as
    borrower, to Fidelity National Title Company, as trustee, for
    the benefit of GMAC Commercial Mortgage Bank, as lender
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.68.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Multifamily Note in the amount of
    $19,600,000, dated July&nbsp;22, 2005, from FIT REN Ocean House,
    LP to GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">10</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.68.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Exceptions to Non Recourse
    Guaranty, dated July&nbsp;22, 2005, by Fortress Investment Trust
    II for the benefit of GMAC Commercial Mortgage Bank
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">21</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Subsidiaries of the registrant
    </FONT></TD>
</TR>

</TABLE>
</CENTER>
</FONT>

<P align="center" style="font-size: 10pt;">II-22

</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<FONT face="helvetica,arial">
<FONT face="times new roman,times">

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="79%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT face="helvetica,arial">Exhibit No.</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B><FONT face="helvetica,arial">Description</FONT></B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Consent of Skadden, Arps, Slate,
    Meagher&nbsp;&#38; Flom LLP (included in Exhibit&nbsp;5.1)
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.2</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Consent of Ernst&nbsp;&#38; Young
    LLP
    </FONT></TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">23</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Consent of KPMG LLP
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    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap><FONT face="helvetica,arial">24</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT face="helvetica,arial">.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <FONT face="helvetica,arial">Powers of Attorney (included on the
    signature pages hereto)
    </FONT></TD>
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    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
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<P align="center" style="font-size: 10pt;">II-23

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[{"type": "S-1", "sequence": "1", "filename": "y10687sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 3529910}]
{"company-data": {"conformed-name": "Brookdale Senior Living Inc.", "cik": "0001332349", "irs-number": "203068069", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-127372", "film-number": "051011653"}, "business-address": {"street1": "330 NORTH WABASH", "street2": "SUITE 1400", "city": "CHICAGO", "state": "IL", "zip": "60611", "phone": "(312) 977-3700"}, "mail-address": {"street1": "330 NORTH WABASH", "street2": "SUITE 1400", "city": "CHICAGO", "state": "IL", "zip": "60611"}}
FORM S-1
As filed with the Securities and Exchange Commission on
August 9, 2005
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BROOKDALE SENIOR LIVING INC.
(Exact name of registrant as specified in its charter)
Delaware
8050
20-3068069
(State or Other Jurisdiction
    of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
330 North Wabash
Suite 1400
Chicago, Illinois 60611
(312) 977-3700
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive
Offices)
Deborah C. Paskin, Esq.
Executive Vice President, Secretary and General Counsel
Brookdale Senior Living Inc.
330 North Wabash
Suite 1400
Chicago, Illinois 60611
(312) 977-3700
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent For Service)
Copies to:
Joseph A. Coco, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
(212) 735-3000
Steven A. Seidman, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019-6099
(212) 728-8000
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the effective date of
this registration statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of earlier effective registration statement for
the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Amount of
Title of Each Class of
Aggregate
Registration
Securities to be Registered
Offering Price(1)(2)
Fee(1)
Common Stock, par value
    $0.01 per share
$200,000,000
$23,540
(1)
Estimated solely for purposes of calculating the registration
    fee in accordance with Rule 457(o) under the Securities Act
    of 1933, as amended.
(2)
Includes offering price of shares that the underwriters have the
    option to purchase to cover over-allotments, if any.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The information in this preliminary
prospectus is not complete and may be changed. These securities
may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell nor does it seek
an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted.
Subject to completion. Dated
August 9, 2005.
Shares
Brookdale Senior Living Inc.
Common Stock
This is an initial public offering of shares of common stock of
Brookdale Senior Living Inc.
Brookdale Senior Living Inc. is
offering                     of
the shares to be sold in the offering. The selling stockholders
identified in this prospectus are offering an additional
4,172,000 shares. Brookdale Senior Living Inc. will not
receive any of the proceeds from the sale of the shares being
sold by the selling stockholders. After this offering, new
investors will own      % of the
Company's common stock and Fortress Investment Holdings LLC
will own over 60% of the Company's common stock.
Prior to this offering, there has been no public market for the
common stock. It is currently estimated that the public offering
price per share will be between
$          and
$          .
Brookdale Senior Living Inc. intends to list the common stock on
the New York Stock Exchange under the symbol "BKD."
See "Risk Factors" on page 12 to read about
factors you should consider before buying shares of the common
stock.
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
Per Share
Total
Initial public offering price
$
$
Underwriting discount
$
$
Proceeds, before expenses, to
    Brookdale
$
$
Proceeds, before expenses, to the
    selling stockholders
$
$
To the extent that the underwriters sell more
than                      shares
of common stock, the underwriters have the option to purchase up
to an
additional                      shares
from Brookdale at the initial public offering price less the
underwriting discount.
The underwriters expect to deliver the shares against payment in
New York, New York
on                     ,
2005.
Goldman, Sachs & Co.
Lehman Brothers
Prospectus
dated                     ,
2005.
TABLE OF CONTENTS
Page
Prospectus
    Summary
1
Risk
    Factors
12
Special
    Note Regarding Forward-Looking Statements
29
Use of
    Proceeds
30
Dividend
    Policy
31
Capitalization
32
Dilution
33
Selected
    Combined Historical Financial and Operating Data
34
Management's
    Discussion and Analysis of Financial Condition and Results of
    Operations
36
Industry
    Overview
63
Business
65
Management
111
Certain
    Relationships and Related Party Transactions
123
Principal and
    Selling Stockholders
129
Description of
    Indebtedness
131
Description of
    Capital Stock
138
Shares
    Eligible for Future Sale
141
Material
    U.S. Federal Income and Estate Tax Considerations to
    Non-U.S. Holders
144
Underwriting
148
Legal
    Matters
151
Experts
151
Where You Can
    Find More Information
151
Index to
    Consolidated Financial Statements
F-1
This prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities offered hereby
in any jurisdiction where, or to any person to whom, it is
unlawful to make such offer or solicitation. The information
contained in this prospectus speaks only as of the date of this
prospectus unless the information specifically indicates that
another date applies. No dealer, salesperson or other person has
been authorized to give any information or to make any
representations other than those contained in this prospectus in
connection with the offer contained herein and, if given or
made, such information or representations must not be relied
upon as having been authorized by us. Neither the delivery of
this prospectus nor any sales made hereunder shall under any
circumstances create an implication that there has been no
change in our affairs or that of our subsidiaries since the date
hereof.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus. You should read the entire prospectus
carefully, including the section entitled "Risk
Factors" and our financial statements and the related notes
included elsewhere in this prospectus, before making an
investment decision. Unless the context suggests otherwise,
references in this prospectus to "Brookdale," the
"Company," "we," "us" and
"our" refer to Brookdale Senior Living Inc. and its
subsidiaries and predecessor entities. References in this
prospectus to "Fortress" refer to Fortress Investment
Holdings LLC and certain of its affiliates. Unless the context
suggests otherwise, references in this prospectus to our
financial and operating information is intended to be pro forma
for the formation transactions described in
"Business — History."
Brookdale Senior Living Inc.
We are the third largest operator of senior living facilities in
the United States based on total capacity with over 380
facilities in 32 states and the ability to serve over
30,000 residents. We offer our residents access to a full
continuum of services across all sectors of the senior living
industry. As of June 30, 2005, we operated 81 independent
living facilities with 14,619 units, 291 assisted living
facilities with 12,342 beds, eight continuing care
retirement communities, or CCRCs, with 3,238 units/beds
(including 825 resident-owned cottages on our CCRC campuses
managed by us) and one skilled nursing facility with
82 units/beds. The majority of our units/beds are located
in campus settings or facilities containing multiple services,
including CCRCs. As of June 30, 2005, our facilities were
on average 88.1% occupied. We generate over 98% of our
revenues from private pay customers, which limits our exposure
to government reimbursement risk. In addition, we control the
operating economics of our facilities through property ownership
and long-term leases. We believe we operate in the most
attractive sectors of the senior living industry with
significant opportunities to increase our revenues through
providing a combination of housing, hospitality services and
health care services. For the three months ended March 31,
2005, 13.7% of our revenues were generated from owned
facilities, 85.8% from leased facilities and 0.5% from
management fees from facilities we operate on behalf of third
parties and affiliates.
We were formed in June 2005 for the purpose of combining two
leading senior living operating companies, Brookdale Living
Communities, Inc., or BLC, and Alterra Healthcare Corporation,
or Alterra. BLC and Alterra have been operating independently
since 1986 and 1981, respectively. Since December 2003, BLC and
Alterra have been under the common control of Fortress. Fortress
is not selling any shares of common stock in this offering.
Following this offering, Fortress will own
43,157,000 shares, or over 60%, of our common stock.
We plan to grow our revenue and operating income through a
combination of: (i) organic growth in our existing
portfolio; (ii) acquisitions of additional operating
companies and facilities; and (iii) the realization of
economies of scale, including those created by the BLC and
Alterra combination. Given the size and breadth of our
nationwide platform, we believe that we are well positioned to
invest in a broad spectrum of assets in the senior living
industry. Since January 2001, we have begun leasing or acquired
the ownership or management of 52 senior living facilities with
approximately 11,000 units/beds. In 2005, we acquired the
ownership or management of 16 senior living facilities with
4,266 units/beds (including 825 resident-owned cottages on
our CCRC campuses managed by us) and an additional facility with
233 units/beds, which is currently under contract for sale.
We believe that the senior living industry is the preferred
alternative to meet the growing demand for a cost-effective
residential setting in which to care for the elderly who cannot,
or as a lifestyle choice choose not to, live independently due
to physical or cognitive frailties and who may, as a result,
require assistance with some of the activities of daily living
or the availability of nursing or other medical care. Housing
alternatives for seniors include a broad spectrum of senior
living service and care options, including independent living,
assisted living, memory care and skilled nursing care. More
specifically, senior living consists of a combination of housing
and the availability of 24-hour a day personal support services
and assistance with certain activities of daily living.
1
Our facilities are predominantly concentrated in the independent
and assisted living portion of the senior housing continuum as
depicted below:
SENIOR HOUSING CONTINUUM OF CARE
We believe that factors contributing to the growth of the senior
living industry include: (i) the aging of the
U.S. population; (ii) consumer preference for greater
independence in a residential setting as compared to
institutional settings, such as skilled nursing facilities; and
(iii) the decreasing ability of relatives to, or choice by
relatives not to, provide care for the elderly in the home.
For the year ended December 31, 2004, and the three months
ended March 31, 2005, we generated:
Pro Forma(1)
Three Months
Ended
Year Ended
March 31,
December 31,
2005
2004
($ in millions)
Revenues
$
204.7
$
790.2
Facility Operating Income(2)
$
75.2
$
290.7
Net Income (Loss)
$
(12.3
)
$
(59.5
)
Adjusted EBITDA(3)
$
22.4
$
81.9
Cash Earnings(4)
$
7.9
$
24.2
(1)
See "Summary Combined Financial Information" and
    "Unaudited Pro Forma Condensed Financial Information"
    for a description of the adjustments included in the pro forma
    results.
(2)
Facility Operating Income is a non-GAAP financial measure we use
    in evaluating our performance. See "Summary Combined
    Financial Information" for a computation of this measure
    and "Management's Discussion and Analysis of Financial
    Condition and Results of Operations — Non-GAAP
    Financial Measures — Facility Operating Income"
    for a detailed description of why we believe such measure is
    useful.
(3)
Adjusted EBITDA is a non-GAAP financial measure we use in
    evaluating our performance. See "Summary Combined Financial
    Information" for a reconciliation of this measure to net
    income and "Management's Discussion and Analysis of
    Financial Condition and Results of Operations —
    Non-GAAP Financial Measures — Adjusted EBITDA"
    for a detailed description of why we believe such measure is
    useful.
(4)
Cash Earnings is a non-GAAP financial measure we use in
    evaluating our performance. See "Summary Combined Financial
    Information" for a reconciliation of this measure to net
    income and "Management's Discussion and Analysis of
    Financial Condition and Results of Operations —
    Non-GAAP Financial Measures — Cash Earnings" for
    a detailed description of why we believe such measure is useful.
2
Industry Trends
The senior living industry has evolved to meet the growing
demand for senior care generated by an aging population
demanding new and better housing alternatives. We believe that
we are well positioned to capitalize on a number of trends in
the senior living industry, including:
•
An increasing number of seniors with longer life
    expectancies and financial resources to support a private pay
    model.
According to the U.S. Census Bureau, the
    population greater than 65 years old is expected to
    increase to approximately 20% of the overall
    U.S. population during the next 25 years, from
    approximately 12% in 2000. As life expectancy continues to
    increase and the elderly continue to become a higher percentage
    of the total U.S. population, we believe the demand for
    service-based senior housing will increase. In addition, seniors
    in the areas in which we operate tend to have a significant
    amount of assets generated from savings, pensions and, due to
    strong national housing markets, the sale of private homes. We
    believe seniors increasingly will have the ability to afford
    senior living services.
•
Fragmentation in the industry provides significant
    acquisition and consolidation opportunities.
The senior
    living industry's independent living and assisted living
    segments are large and fragmented, characterized predominantly
    by numerous local and regional operators. According to the
    American Seniors Housing Association, or ASHA, the top five
    operators of senior living facilities measured by total resident
    capacity control only 7% of the total capacity. In addition,
    according to ASHA, only the top five managers operate more than
    14,000 senior living units/beds. We believe that this
    fragmentation provides significant acquisition and consolidation
    opportunities.
•
Majority of independent and assisted living revenue growth
    generated from private pay sources.
Because we generate
    over 98% of our revenues from private pay customers, our
    resident fees are not constrained by regulatory or other
    governmental considerations. Independent and assisted living
    services are not generally reimbursable under government
    reimbursement programs such as Medicare and Medicaid, and thus
    we have limited exposure to reimbursement risk.
•
Favorable and improving supply and demand balance.
We believe that the number of vacant senior living units has
    declined steadily over the past several years. According to
    ASHA, the number of new senior housing units identified as under
    construction has declined approximately 60% from
    65,879 units in 1999 to 26,355 units in 2004. Combined
    with increasing life expectancies, we believe there is a
    favorable and improving supply and demand balance.
Growth Strategy
Our objective is to increase our revenues, Adjusted EBITDA, Cash
Earnings and dividends per share of our common stock, while
remaining one of the premier senior living providers in the
United States. Key elements of our strategy to achieve these
objectives include:
•
Organic growth in our existing operations.
We plan
    to grow our existing operations by:
•
increasing revenues through a combination of occupancy growth
    and resident fee increases as a result of growing demand for
    senior living facilities. For the 343 facilities we have owned,
    leased or managed since 2003 (excluding four development
    facilities), our facility operating income has increased
    approximately 7.0% on an annualized basis and, including the
    four development facilities, our facility operating income has
    increased approximately 8.0% on an annualized basis; and
3
•
taking advantage of our sophisticated operating and marketing
    expertise to retain existing residents and attract new residents
    to our facilities. As of June 30, 2005, our facilities were
    on average 88.1% occupied.
•
Growth through operating efficiencies.
We intend
    to utilize our expertise and size to capitalize on economies of
    scale resulting from our national platform. Our geographic
    footprint and centralized infrastructure provide us with a
    significant operational advantage over local and regional
    operators of senior living facilities. As a result, we are able
    to achieve economies of scale with respect to the goods and
    services we purchase. In connection with the combination of BLC
    and Alterra, we have negotiated new contracts for food,
    insurance and other services. In addition, we will reduce the
    size of our corporate workforce through a consolidation of
    corporate functions such as accounting, finance, human resources
    and legal. Collectively, we expect these initiatives to result
    in recurring operating and general and administrative expense
    savings, net of additional recurring costs expected to be
    incurred as a public company, of between approximately
    $13.0 million and $15.0 million per year. We began to
    realize these savings upon the completion of our formation
    transactions
    in           2005.
    See "Management's Discussion and Analysis of Financial
    Condition and Results of Operations — Formation
    Transactions." As we continue to grow both organically and
    through acquisitions, we expect to have further opportunities to
    realize other synergies and operating efficiencies.
•
Growth through the acquisition and consolidation of asset
    portfolios and other senior living companies.
We plan to
    take advantage of the fragmented independent living and assisted
    living sectors by selectively purchasing existing operating
    companies and facilities. Since January 2001, we have begun
    leasing or acquired the ownership or management of 52 senior
    living facilities with approximately 11,000 units/beds. In
    2005, we acquired the ownership or management of 16 senior
    living facilities with 4,266 units/beds (including
    825 resident-owned cottages on our CCRC campuses managed by
    us) and an additional facility with 233 units/beds, which
    is currently under contract for sale. Our acquisition strategy
    will continue to focus primarily on facilities where we can
    improve service delivery, occupancy rates and cash flow. We
    expect to finance our acquisitions, on a long-term basis, by
    using primarily equity issuances combined with fixed- and
    floating-rate debt.
•
Expansion of existing facilities where economically
    advantageous.
Certain of our facilities with stabilized
    occupancies and excess demand in their respective markets may
    benefit from additions and expansions offering increased
    capacity, as well as additional levels of service for residents
    requiring higher levels of care. Furthermore, the expansion of
    existing facilities allows us to enhance our facility-level
    return on investment by increasing the revenue base at a
    facility with lower incremental operating costs.
Competitive Strengths
We believe our nationwide network of senior living facilities is
well positioned to benefit from the growth and increasing demand
in the industry. Some of our most significant competitive
strengths are:
•
Skilled management team with extensive experience.
Our senior management team has extensive experience in
    acquiring, operating and managing a broad range of senior living
    assets. Our chairman and top five executive officers have over
    115 years of combined experience in the senior living,
    hospitality and real estate industries. In addition, as
    stockholders, our management team is incentivized to continue to
    grow our business. Following this offering, our senior
    management team will own
    approximately           %
    of our common stock on a fully diluted basis.
•
Proven track record of successful acquisitions.
Since January 2001, we have begun leasing or acquired the
    ownership or management of 52 senior living facilities with
    approximately
4
11,000 units/beds. Our experience in acquiring senior
    living facilities enables us to consider a wide range of
    acquisition targets in the senior living industry. In addition,
    we believe our expertise in integrating these facilities onto
    our operating platform enables us to acquire facilities while
    causing minimal disruption to either the residents or facility
    operating staff.
•
High-quality purpose-built facilities.
We operate
    a nationwide base of over 380 purpose-built facilities in
    32 states, including 66 facilities in eight of the top ten
    standard metropolitan statistical areas, or SMSAs. The average
    age of our facilities is 9.7 years. We have experienced
    significant facility operating income growth and occupancy
    growth over the past year. Our facility operating income
    increased 16.4%, from $54.8 million for the three months
    ended March 31, 2004 to $63.8 million for the three
    months ended March 31, 2005, and our occupancy rate
    increased 0.7%, from 86.8% as of March 31, 2004 to 87.5% as
    of March 31, 2005. For the 347 and 343 (excluding four
    development facilities) facilities we have operated since
    January 2004, our facility operating income increased 8.7% and
    7.4%, respectively, for the three months ended March 31,
    2005, as compared to the three months ended March 31, 2004.
•
Ability to provide a broad spectrum of care.
Given
    our diverse mix of independent and assisted living facilities
    and CCRCs, we are able to meet a wide range of our
    customers' needs. We believe that we are one of the few
    companies in the senior living industry with this capability. We
    believe that our multiple product offerings create marketing
    synergies and cross-marketing opportunities.
•
The size of our business allows us to realize cost
    efficiencies.
We are the third largest operator of
    senior living facilities in the United States based on total
    capacity. The size of our business allows us to realize cost
    savings in the purchasing of goods and services and also allows
    us to achieve increased efficiencies with respect to various
    corporate functions, most of which have yet to be realized in
    our operating results given the recent combination of BLC and
    Alterra
    in           2005.
    In addition, our size and broad geographical footprint give us
    an advantage in executing our acquisition strategy. When we
    acquire a facility in a location where we already operate, we
    are able to integrate the additional facility with limited or no
    incremental cost. This allows us to acquire assets more
    efficiently and to better compete for acquisitions against other
    operators with a more geographically limited presence.
Formation Transactions
We are a holding company formed in June 2005 for the purpose of
combining, through a series of mergers, two leading senior
living operating companies, BLC and Alterra, which have been
operating independently since 1986 and 1981, respectively.
Fortress has been the majority owner of BLC since September 2000
and of Alterra since December 2003. As a result of the formation
transactions completed
in                      2005,
prior to the consummation of this offering, all of our
outstanding common stock is held by affiliates of Fortress, an
affiliate of Capital Z Partners, Emeritus Corporation,
NW Select LLC and members of our management. Each of
Emeritus and NW Select is selling all of the shares of our
common stock it owns in this offering. Fortress and its
affiliates are not selling any of the shares of our common stock
that they own in this offering. See "Business —
History" for a more detailed description of these formation
transactions and "Certain Relationships and Related Party
Transactions" for a more detailed description of our
relationships with these stockholders.
In addition, we recently acquired, through affiliates of
Fortress, 16 additional senior living facilities, not including
one facility currently under contract for sale. See
"Business — History — Acquisition and
History of Alterra Healthcare Corporation" and
"Business — History — Acquisition and
History of Fortress CCRC Portfolio" for a detailed
description of these acquisitions.
5
Risk Factors
An investment in our common stock is subject to a number of
risks and uncertainties. Before investing in our common stock,
you should carefully consider the following, as well as the more
detailed discussion of risk factors and other information
included in "Risk Factors" and elsewhere in this
prospectus:
•
Our operating businesses were recently transferred to us and we
    have a limited operating history on a combined basis;
•
We have a history of losses; one of our operating subsidiaries,
    Alterra Healthcare Corporation, emerged from Chapter 11
    bankruptcy reorganization in December 2003 and we may not be
    able to achieve profitability;
•
We may not be able to generate sufficient cash flow to cover
    required interest and long-term operating lease payments, which
    could result in defaults of the related debt or operating leases
    or cross-defaults under other debt or operating leases;
•
Our indebtedness and long-term operating leases could adversely
    affect our financial condition;
•
If we do not effectively manage our growth, our business and
    financial results could be adversely affected; and
•
If the ownership of our common stock continues to be highly
    concentrated, it may prevent you and other stockholders from
    influencing significant corporate decisions and may result in
    conflicts of interest.
Our Executive Offices
Our principal executive offices are located at 330 North
Wabash, Suite 1400, Chicago, Illinois 60611. Our telephone
number is 312-977-3700. Our internet address is
www.brookdaleliving.com. Information on our website does not
constitute part of this prospectus.
In addition, we maintain an operations support center at
6737 W. Washington St., Suite 2300, Milwaukee,
Wisconsin 53214. Our telephone number at this center is
414-918-5000.
6
THE OFFERING
Common stock offered by us in this offering
shares.
Common stock offered by selling stockholders in this
    offering
4,172,000 shares. All shares of common stock being offered
    by the selling stockholders pursuant to this prospectus are
    being offered by Emeritus Corporation and NW Select LLC. Each of
    the selling stockholders is selling all of its shares of common
    stock pursuant to this offering. Following this offering,
    neither Emeritus Corporation nor NW Select LLC will own any
    shares of our common stock.
Common stock to be outstanding after this offering
shares.
Use of proceeds
We expect to use the net proceeds from the sale of the shares of
    common stock we are offering for repayment of certain of our
    outstanding indebtedness, acquisition of additional senior
    living operating companies and facilities and other general
    corporate purposes. See "Use of Proceeds."
We will not receive any proceeds from the sale of shares of
    common stock offered by the selling stockholders.
Dividend policy
On           ,
    2005, we paid a dividend of
    $          per
    share of our common stock, or an aggregate of
    $           million.
    We intend to continue to pay regular quarterly dividends to the
    holders of our common stock. The payment of dividends is subject
    to the discretion of our board of directors and will depend on
    many factors, including our results of operations, financial
    condition and capital requirements, earnings, general business
    conditions, restrictions imposed by financing arrangements,
    legal restrictions on the payment of dividends and other factors
    the board of directors deems relevant. We expect that in certain
    quarters we may pay dividends that exceed our net income amounts
    for such period as calculated in accordance with generally
    accepted accounting principals, or GAAP.
Proposed New York Stock Exchange symbol
"BKD".
7
SUMMARY COMBINED FINANCIAL INFORMATION
The following tables summarize the combined financial
information for our business. You should read these tables along
with "Management's Discussion and Analysis of
Financial Condition and Results of Operations,"
"Business" and our combined financial statements and
the related notes included elsewhere in this prospectus.
We derived the summary historical combined statements of
operations data for each of the three years in the period ended
December 31, 2004, set forth below, from our audited
combined financial statements included elsewhere in this
prospectus. The statements of operations data for the three
months ended March 31, 2005 and 2004 and the balance sheet
data as of March 31, 2005 are derived from our unaudited
condensed combined interim financial statements included
elsewhere in this prospectus.
The summary pro forma condensed combined statement of operations
data for the year ended December 31, 2004 and the three
months ended March 31, 2005 and the summary pro forma
condensed combined balance sheet data as of March 31, 2005
are unaudited and have been derived from our historical combined
financial statements, adjusted to give effect to the events
noted below, as if such events had occurred on January 1,
2004 with respect to the pro forma condensed combined statement
of operations data and as of March 31, 2005 with respect to
the pro forma condensed combined balance sheet data.
The summary pro forma condensed combined statement of operations
data for the year ended December 31, 2004 and the three
months ended March 31, 2005 include the following
adjustments: (1) the $982.8 million sale-leaseback to
Provident Senior Living Trust, or Provident, (2) the lease
of 15 facilities from Ventas Realty, Limited Partnership, or
Ventas, (3) the $20.4 million purchase of facilities
currently leased, (4) the issuance of $182.0 million
of mortgage loans and repayment of $178.8 million of
then-outstanding mortgage loans, (5) the repayment of
$62.2 million of indebtedness from the proceeds of this
offering, (6) the termination of certain forward interest
rate swaps, (7) the repayment of $2.2 million of
lessor advances and (8) the acquisition of the Fortress
CCRC Portfolio and the Prudential Portfolio.
The condensed combined pro forma balance sheet data as of
March 31, 2005 include the following adjustments:
(1) this offering and application of a portion of the
proceeds from this offering to repay $62.2 million of
indebtedness, (2) the repayment of $2.2 million of
lessor advances, (3) the acquisition of the Fortress CCRC
Portfolio and the Prudential Portfolio and (4) the payment
of a $20.0 million dividend by Alterra.
See our pro forma condensed combined financial statements
included elsewhere in this prospectus for a complete description
of the adjustments made to derive the pro forma condensed
combined statement of operations data and pro forma condensed
combined balance sheet data.
8
Pro Forma,
as adjusted
Pro Forma,
Three
as adjusted
Months
Three Months Ended
Year
Ended
March 31,
Ended
Year Ended December 31,
March 31,
December 31,
2005
2005
2004
2004
2004
2003
2002
Statement of Operations Data
(in thousands, expect per
share data):
Resident fees
$
203,264
$
174,112
$
154,583
$
783,846
$
657,327
$
217,216
$
156,894
Management fees
934
871
1,050
4,443
3,545
5,368
4,622
Amortization of entrance fees
464
—
—
1,953
—
—
—
Total Revenues
204,662
174,983
155,633
790,242
660,872
222,584
161,516
Facility operating expenses
128,042
110,328
99,810
493,100
415,169
133,119
92,980
Lease expense
47,252
46,502
17,825
183,606
99,997
30,744
31,003
Compensation Expense
2,528
—
—
10,114
—
—
—
Depreciation and amortization
15,263
5,596
14,597
70,827
52,307
22,480
13,708
General and administrative
11,331
11,433
10,239
43,233
43,640
15,997
12,540
Total expenses
204,416
173,859
142,471
800,880
611,113
202,340
150,231
Income from operations
$
246
$
1,124
$
13,162
$
(10,638
)
$
49,759
$
20,244
$
11,285
Interest expense — debt
    and capitalized lease obligation
$
(11,807
)
$
(8,899
)
$
(18,167
)
$
(45,419
)
$
(63,634
)
$
(25,106
)
$
(9,490
)
Net income (loss)
$
(12,324
)
$
(4,473
)
$
(9,067
)
$
(59,547
)
$
(21,889
)
$
(16,499
)
$
11,717
Earnings per share:
Basic
$
—
$
(4.47
)
$
(9.06
)
$
—
$
(21.87
)
$
(196.42
)
$
11,717.00
Diluted
$
—
$
(4.47
)
$
(9.06
)
$
—
$
(21.87
)
$
(196.42
)
$
11,717.00
Other Data:
Adjusted EBITDA(1)
$
22,368
$
10,518
$
27,562
$
81,935
$
104,394
$
43,287
$
28,600
Cash Earnings(2)
$
7,861
$
(1,154
)
$
7,620
$
24,171
$
27,870
$
27,784
$
33,823
Facility Operating Income(3)
$
75,222
$
63,784
$
54,773
$
290,746
$
242,158
$
84,097
$
63,914
Number of facilities (at end of
    period)(4)
381
366
359
381
367
359
60
Total units operated(4)
30,281
26,109
24,423
30,281
26,208
24,423
11,334
Occupancy rate at end of period(5)
—
89.0
%
86.8
%
—
89.4
%
87.5
%
91.0
%
Average monthly revenue per unit
    (same store)
—
$
2,880
$
2,815
—
$
2,827
$
2,660
$
2,516
(1)
We believe Adjusted EBITDA is useful to an investor in
    evaluating our performance as it is one of the primary measures
    used by our management team to evaluate our operations and is
    commonly used in our industry. Adjusted EBITDA consists of net
    income (loss) before non-operating (income) loss, depreciation
    and amortization, (gain) loss on extinguishment of debt,
    loss on sale of properties, straight-line lease expense
    (income), amortization of deferred gain, amortization of
    deferred entrance fees and non-cash compensation expense, and
    including entrance fee receipts and refunds. See
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations — Non-GAAP
    Financial Measures — Adjusted EBITDA" for a more
    detailed discussion of why we believe it is a useful measure.
(2)
We believe Cash Earnings is useful to an investor in evaluating
    our performance as it is one of the primary measures used by our
    management team to evaluate our operations and to assess our
    capacity to pay dividends. Cash Earnings consists of net income
    (loss) before non-operating (income) loss, depreciation and
    amortization, (gain) loss on extinguishment of debt, loss
    on sale of properties, straight-line lease expense (income),
    amortization of deferred gain, amortization of deferred entrance
    fees and non-cash compensation expense, and including entrance
    fee receipts and refunds, and after interest expense (including
    capitalized lease expense), interest income and recurring
    capital expenditures. See "Management's Discussion and
    Analysis of Financial Condition and Results of
    Operations — Non-GAAP Financial Measures —
    Cash Earnings" for a more detailed discussion of why we
    believe it is a useful measure.
(3)
We believe Facility Operating Income is useful to an investor in
    evaluating our performance as it is one of the primary measures
    used by our management team to evaluate our operating
    performance. Facility Operating Income consists of resident fees
    less facility operating expenses. See "Management's
    Discussion and Analysis of Financial Condition and Results of
    Operations — Non-GAAP Financial Measures —
    Facility Operating Income" for a more detailed discussion
    of why we believe it is a useful measure.
(4)
Excludes facilities held for sale.
(5)
Excludes facilities held for sale and facilities managed by us.
9
The reconciliation of net income (loss) to Adjusted EBITDA and
Cash Earnings is as follows:
Pro Forma
Pro
as Adjusted
Forma
Three
as Adjusted
Months
Three Months
Year
Ended
Ended March 31,
Ended
Year Ended December 31,
March 31,
December 31,
2005
2005
2004
2004
2004
2003
2002
Net income (loss)
$
(12,324
)
$
(4,473
)
$
(9,067
)
$
(59,547
)
$
(21,889
)
$
(16,499
)
$
11,717
Cumulative effect of a change in
    accounting principle, net
—
—
—
—
—
13,208
—
Loss on discontinued operations
(26
)
70
820
(31
)
722
643
—
Provision (benefit) for income taxes
166
166
(713
)
3,921
11,111
139
8,666
Other
246
246
974
114
114
—
—
Equity in (earnings) loss of
    unconsolidated ventures
187
187
373
931
931
(318
)
(584
)
Loss (gain) extinguishment of
    debt
625
453
—
(263
)
(1,051
)
(12,511
)
—
Loss on sale of properties
—
—
—
—
—
24,513
—
Interest expense:
Debt
9,531
6,623
16,236
37,636
55,851
24,484
9,490
Capitalized lease obligation
2,276
2,276
1,931
7,783
7,783
622
—
Change in fair value of derivatives
—
(4,062
)
2,832
—
(3,176
)
—
—
Interest income
(435
)
(362
)
(224
)
(1,182
)
(637
)
(14,037
)
(18,004
)
Income from operations
246
1,124
13,162
(10,638
)
49,759
20,244
11,285
Depreciation and amortization
15,263
5,596
14,597
70,827
52,307
22,480
13,708
Straight-line lease expense (income)
6,094
6,094
(62
)
20,422
4,588
1,102
3,837
Amortization of deferred gain
(1,448
)
(2,296
)
(135
)
(4,451
)
(2,260
)
(539
)
(230
)
Non-cash compensation expense
2,528
—
—
10,114
—
—
—
Amortization of entrance fees
(464
)
—
—
(1,953
)
—
—
—
Entrance fee receipts
686
—
—
3,185
—
—
—
Entrance fee disbursements
(537
)
—
—
(5,571
)
—
—
—
Adjusted EBITDA
$
22,368
$
10,518
$
27,562
$
81,935
$
104,394
$
43,287
$
28,600
Interest expense
(9,531
)
(6,623
)
(16,236
)
(37,636
)
(55,851
)
(24,484
)
(9,490
)
Capitalized lease obligation(1)
(1,983
)
(1,983
)
(1,931
)
(7,783
)
(7,783
)
(622
)
—
Interest income
435
362
224
1,182
637
14,037
18,004
Recurring capital expenditures
(3,428
)
(3,428
)
(1,999
)
(13,527
)
(13,527
)
(4,434
)
(3,291
)
Cash Earnings
$
7,861
$
(1,154
)
$
7,620
$
24,171
$
27,870
$
27,784
$
33,823
(1)
Represents cash portion of capitalized lease obligation interest
    expense.
10
The recalculation of facility operating income is as follows:
Pro Forma
as Adjusted
Pro Forma
Three Months
Three Months
as Adjusted
Ended
Ended March 31,
Year Ended
Year Ended December 31,
March 31,
December 31,
2005
2005
2004
2004
2004
2003
2002
Resident fees
$
203,264
$
174,112
$
154,583
$
783,846
$
657,327
$
217,216
$
156,894
Facility operating expenses
128,042
110,328
99,810
493,100
415,169
133,119
92,980
Facility operating income
$
75,222
$
63,784
$
54,773
$
290,746
$
242,158
$
84,097
$
63,914
Pro Forma
as of
As of
March 31,
March 31,
2005
2005
Combined Balance Sheet Data (in
    thousands):
Cash and cash equivalents
$
$
76,083
Total assets
$
$
729,420
Total debt
$
607,887
$
383,275
Total stockholders' equity
$
$
66,605
11
RISK FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider the following risk factors, as
well as other information contained in this prospectus, before
deciding to invest in our common stock. Generally, the risks
facing us fall into four categories — risks related to
our business, risks related to our industry, risks related to
our organization and structure and risks related to this
offering. If any of the following events actually occur or risks
actually materialize, our business, financial condition,
operating results and/or cash flow could suffer materially and
adversely. In this case, the trading price of our common stock
could decline and you could lose all or part of your investment.
Additional risks and uncertainties not currently known to us or
that we currently believe to be immaterial also may materially
and adversely affect our business, financial condition,
operating results and/or cash flow.
Risks Related to Our Business
Our operating businesses were recently transferred to us
and we have a limited operating history on a combined
basis.
In June 2005, we were formed for the purpose of combining two
leading senior living operating companies, BLC and Alterra,
through a series of mergers that occurred
in             2005.
Prior to this combination, we had no operations or assets. We
are therefore subject to the risks generally associated with the
formation of any new business and the combination of existing
businesses, including the risk that we will not be able to
realize expected efficiencies and economies of scale or
implement our business strategies. As such, we have no
meaningful combined and consolidated operating history upon
which investors may evaluate our performance as an integrated
entity and assess our future prospects. In addition, we recently
acquired the ownership or management of 16 additional senior
living facilities, not including one facility currently under
contract for sale. See "Business — History."
There can be no assurance that we will be able to successfully
integrate and oversee the combined operations of BLC and Alterra
and these additional facilities. Accordingly, our financial
performance to date may not be indicative of our long-term
future performance and may not necessarily reflect what our
results of operations, financial condition and cash flows would
have been had we operated as separate, stand-alone entities
pursuing independent strategies during the periods presented.
Failure to successfully integrate our operations could have a
material adverse effect on our revenues and earnings.
We have a history of losses; one of our operating
subsidiaries, Alterra Healthcare Corporation, emerged from
Chapter 11 bankruptcy reorganization in December 2003 and
we may not be able to achieve profitability.
We incurred net losses of approximately $4.5 million for
the three months ended March 31, 2005, approximately
$21.9 million for the year ended December 31, 2004 and
approximately $16.5 million for the year ended
December 31, 2003. In addition, Alterra emerged from
Chapter 11 bankruptcy reorganization in December 2003,
approximately 11 months after filing a voluntary petition
for bankruptcy reorganization, pursuant to which it sought to
facilitate and complete its ongoing restructuring initiatives.
Prior to its reorganization, Alterra's overall cash
position had declined to a level that it believed to be
insufficient to operate the company. This resulted in its
failure to make certain scheduled debt service and lease
payments, which caused it to be in default under several of its
principal financing arrangements. The principal components of
Alterra's restructuring plan were to dispose of selected
under-performing and non-strategic assets and to restructure its
capital structure. Alterra emerged from bankruptcy in December
2003 when it was acquired and recapitalized by FEBC-ALT
Investors LLC, an affiliate of Fortress, Emeritus Corporation
and NW Select LLC. In connection with its reorganization,
Alterra adopted fresh start accounting as of December 4,
2003. If we do not effectively manage our cash flow and business
operations going forward or otherwise achieve profitability, our
business, financial condition and results of operations would be
adversely affected.
12
You may not be able to compare our historical financial
information to our current financial information, which will
make it more difficult to evaluate an investment in our common
stock.
As a result of Alterra's emergence from bankruptcy, we are
operating a portion of our business with a new capital structure
and fewer properties and have adopted fresh start accounting
prescribed by generally accepted accounting principles.
Accordingly, unlike companies that have not previously filed for
bankruptcy protection, a portion of our financial condition and
results of operations are not comparable to the financial
condition and results of operations reflected in Alterra's
historical financial statements for periods prior to
December 4, 2003 contained in this prospectus. Without
historical financial statements to compare to our current
performance, it may be more difficult for you to assess our
future prospects when evaluating an investment in our common
stock.
We may not be able to generate sufficient cash flow to
cover required interest and long-term operating lease payments,
which could result in defaults of the related debt or operating
leases or cross-defaults under other debt or operating
leases.
At March 31, 2005, we had $383.3 million of
outstanding indebtedness, including $66.3 million of
capital and financing lease obligations. In addition, in
connection with the acquisition of the Fortress CCRC Portfolio
and the Prudential Portfolio, we incurred an additional
$276.8 million aggregate amount of indebtedness. We intend
to continue financing our facilities through mortgage financing,
long-term operating leases and other types of financing,
including borrowings under our lines of credit and future credit
facilities we may obtain. We cannot give any assurance that we
will generate sufficient cash flow from operations to cover
required interest, principal and lease payments. Any non-payment
or other default under our financing arrangements could, subject
to cure provisions in the case of a debt financing, cause the
lender to foreclose upon the facility or facilities securing
such indebtedness or, in the case of a lease, cause the lessor
to terminate the lease, with a consequent loss of income and
asset value to us. In some cases, indebtedness is secured by
both a mortgage on a facility (or facilities) and a guaranty by
us, BLC and/or Alterra. In the event of a default, the lender
could avoid judicial procedures required to foreclose on real
property by declaring all amounts outstanding under the guaranty
immediately due and payable, and requiring the respective
guarantor to fulfill its obligations to make such payments.
Additionally, a foreclosure on any of our properties could cause
us to recognize taxable income, even if we did not receive any
cash proceeds in connection with such foreclosure. Further,
because our mortgages and operating leases generally contain
cross-default and cross-collateralization provisions, a default
by us could affect a significant number of facilities, financing
arrangements and operating leases.
In addition, as of March 31, 2005, our lessors have
invested a total of $1,874.4 million, which includes
capital and financing leases of $66.3 million, in
facilities that we lease from them. Lease financing transactions
carry an inherently higher level of leverage than debt
financings. For the three months ended March 31, 2005, our
overall lease coverage in our leased portfolio was 1.22 to 1.00
(measuring coverage before capital spending reserves and central
management costs).
Our indebtedness and long-term operating leases could
adversely affect our financial condition.
At March 31, 2005, we had approximately $383.3 million
of outstanding indebtedness, including $66.3 million of
capital and financing lease obligations, and we may incur
additional indebtedness or enter into additional leases in the
future. In addition, in connection with the acquisition of the
Fortress CCRC Portfolio and the Prudential Portfolio, we
incurred an additional $276.8 million aggregate amount of
indebtedness. Our level of indebtedness and our long-term
operating leases
13
could adversely affect our future operations and/or impact our
stockholders, including, without limitation:
•
We may have little or no cash flow apart from cash flow that is
    dedicated to the payment of any interest, principal or
    amortization required with respect to outstanding indebtedness
    and lease payments with respect to our long-term operating
    leases;
•
Increases in our outstanding indebtedness, leverage and
    long-term operating leases will increase our vulnerability to
    adverse changes in general economic and industry conditions, as
    well as to competitive pressure;
•
Increases in our outstanding indebtedness may limit our ability
    to obtain additional financing for working capital, capital
    expenditures, acquisitions, general corporate and other
    purposes; and
•
Our ability to satisfy our obligations with respect to holders
    of our capital stock may be limited.
Our ability to make payments of principal and interest on our
indebtedness and to make lease payments on our operating leases
depends upon our future performance, which will be subject to
general economic conditions, industry cycles and financial,
business and other factors affecting our operations, many of
which are beyond our control. Our business might not continue to
generate cash flow at or above current levels. If we are unable
to generate sufficient cash flow from operations in the future
to service our debt or to make lease payments on our operating
leases, we may be required, among other things, to seek
additional financing in the debt or equity markets, refinance or
restructure all or a portion of our indebtedness, sell selected
assets, reduce or delay planned capital expenditures or delay or
abandon desirable acquisitions. Such measures might not be
sufficient to enable us to service our debt or to make lease
payments on our operating leases. In addition, any such
financing, refinancing or sale of assets might not be available
on economically favorable terms to us.
Our existing credit facilities, mortgage loans and
sale-leaseback arrangements contain covenants that restrict our
operations and any default under such facilities, loans or
arrangements could result in the acceleration of indebtedness or
termination of the leases and may inhibit our ability to grow
our business and increase revenues.
As of March 31, 2005, we had $383.3 million of
outstanding indebtedness, including $66.3 million of
capital and financing lease obligations. In addition, in
connection with the acquisition of the Fortress CCRC Portfolio
and the Prudential Portfolio, we incurred an additional
$276.8 million aggregate amount of indebtedness. Our
outstanding indebtedness and leases contain restrictions and
covenants and require us to maintain or satisfy specified
financial ratios and coverage tests. Pursuant to these
covenants, we must satisfy ongoing financial covenants,
including maintaining debt service and lease coverage ratios on
a consolidated basis and on a facility or facilities basis based
on the debt securing the facilities. In addition, certain of our
leases require us to maintain lease coverage ratios on a lease
portfolio basis (each as defined in the agreements) and maintain
stockholders' equity or tangible net worth amounts. The
debt service coverage ratios are generally calculated as
revenues less operating expenses, including an implied
management fee and a reserve for capital expenditures, divided
by the debt (principal and interest) or lease payment. The
stockholders' equity is calculated in accordance with GAAP,
and in certain circumstances less intangible assets or
liabilities, or stockholders' equity plus deferred gains
from sale-leaseback transactions. See "Description of
Indebtedness" for additional restrictive covenants and
lender consents required under our outstanding indebtedness.
Our outstanding indebtedness and leases are secured by the
facilities and, in certain cases, a guaranty by us, BLC and/or
Alterra. Therefore, an event of default under the outstanding
indebtedness or leases, subject to cure provisions in certain
instances, would give the respective
14
lenders or lessors, as applicable, the right to declare all
amounts outstanding to be immediately due and payable, terminate
the lease, foreclose on collateral securing the outstanding
indebtedness and leases and restrict our ability to make
additional borrowings under the outstanding indebtedness or
continue to operate the properties subject to the lease. Certain
of our outstanding indebtedness and leases contain cross-default
provisions so that a default under certain outstanding
indebtedness would cause a default under certain of our
operating leases. Certain of our outstanding indebtedness and
long-term leases also restrict, among other things, our ability
to incur additional debt.
The substantial majority of our lease arrangements are
structured as master leases. Under a master lease, we may lease
a large number of geographically dispersed properties through an
indivisible lease. As a result, it is difficult to restructure
the composition of the portfolio or economic terms of the lease
without the consent of the landlord. Failure to comply with
Medicare or Medicaid provider requirements is a default under
several of our master lease and debt financing instruments. In
addition, potential defaults related to an individual property
may cause a default of an entire master lease portfolio and
could trigger cross-default provisions in our outstanding
indebtedness and other leases.
These restrictions may interfere with our ability to obtain
financing or to engage in other business activities, which may
inhibit our ability to grow our business and increase revenues.
If we fail to comply with any of these requirements, then the
related indebtedness could become immediately due and payable.
We cannot assure you that we could pay this debt if it became
due.
Certain of our master leases contain radius restrictions which
limit our ability to develop or acquire new facilities within a
specified distance from certain existing facilities covered by
such master leases.
Mortgage debt and long-term lease obligations expose us to
increased risk of loss of property, which could harm our
financial condition.
Mortgage debt and long-term lease obligations increase our risk
of loss because defaults on indebtedness secured by properties
or pursuant to the terms of the lease may result in foreclosure
actions initiated by lenders or lessors and ultimately our loss
of the property securing any loans for which we are in default
or cause the lessor to terminate the lease. For tax purposes, a
foreclosure of any of our properties would be treated as a sale
of the property for a purchase price equal to the outstanding
balance of the debt secured by the mortgage. If the outstanding
balance of the debt secured by the mortgage exceeds our tax
basis in the property, we would recognize taxable income on
foreclosure, but would not receive any cash proceeds, and our
earnings could be negatively impacted. Further, our mortgage
debt and long-term leases generally contain cross-default and
cross-collateralization provisions and a default on one facility
could affect a significant number of our facilities, financing
arrangements and operating leases.
If we do not effectively manage our growth, our business
and financial results could be adversely affected.
We plan to grow organically through our existing operations,
through selectively purchasing existing senior living operating
companies and facilities, and through the expansion of our
existing facilities. In 2005, we have already acquired the
ownership or management of 16 senior living facilities with
4,266 units/beds (including 825 resident-owned cottages on
our CCRC campuses managed by us) and an additional facility with
233 units/beds, which is currently under contract for sale. This
growth will place significant demands on our current management
resources. Our ability to manage our growth effectively and to
successfully integrate new acquisitions and expansions into our
existing business will require us to continue to expand our
operational, financial and management information systems and to
continue to retain, attract, train, motivate and manage key
employees. Also, the additional facilities will require us to
maintain consistent quality control measures that allow our
management to effectively identify deviations that result in
delivering care and services that are substandard, which may
result in litigation and/or loss of licensure or certification.
If we are unable to
15
manage our growth effectively and successfully integrate new
acquisitions and expansions into our existing business or
maintain consistent quality control measures, our business,
financial condition and results of operations could be adversely
affected.
Unforeseen costs associated with the acquisition of new
facilities could reduce our profitability.
Our growth strategy contemplates future acquisitions of existing
senior living operating companies and facilities. Facilities
that we may acquire in the future may generate unexpectedly low
or no returns or may not meet a risk profile that our investors
find acceptable. In addition, we might encounter unanticipated
difficulties and expenditures relating to any of the acquired
facilities, including contingent liabilities, or newly acquired
facilities might require significant management attention that
would otherwise be devoted to our ongoing business. These costs
may negatively affect our results of operations.
Competition for the acquisition of strategic assets from
buyers with lower costs of capital than we are able to obtain
could limit our ability to grow our business effectively.
Several real estate investment trusts, or REITs, have similar
asset acquisition objectives as we do, along with greater
financial resources and lower costs of capital than we are able
to obtain. This may increase competition for acquisitions that
would be suitable to us, making it more difficult for us to
compete and successfully implement our growth strategy. There is
significant competition among potential acquirors in the senior
living industry, including REITs, and there can be no assurance
that we will be able to successfully implement our growth
strategy or complete acquisitions, which could limit our ability
to grow our business effectively.
We may need additional capital to fund our operations and
finance our growth, and we may not be able to obtain it on terms
acceptable to us, or at all.
Continued expansion of our business through the acquisition of
existing senior living operating companies and facilities and
expansion of our existing facilities may require additional
capital, particularly if we were to accelerate our acquisition
and expansion plans. Financing may not be available to us or may
be available to us only on terms that are not favorable. In
addition, certain of our outstanding indebtedness and long-term
leases also restrict, among other things, our ability to incur
additional debt. If we are unable to raise additional funds or
obtain it on terms acceptable to us, we may have to delay or
abandon some or all of our growth strategies. Further, if
additional funds are raised through the issuance of additional
equity securities, the percentage ownership of our stockholders
would be diluted. See "Dilution." Any newly issued
equity securities may have rights, preferences or privileges
senior to those of our common stock. See "Description of
Capital Stock."
Due to the dependency of our revenues on private pay
sources, events which adversely affect the ability of seniors to
afford our monthly resident fees could cause our revenues and
results of operations to decline.
Costs to seniors associated with independent and assisted living
services are not generally reimbursable under government
reimbursement programs such as Medicare and Medicaid.
Accordingly, over 98% of our resident fee revenues are derived
from private pay sources consisting of income or assets of
residents and/or their family members. Only seniors with income
or assets meeting or exceeding the comparable median in the
regions where our facilities are located typically can afford to
pay our monthly resident fees. Economic downturns or changes in
demographics could adversely affect the ability of seniors to
afford our resident fees. In addition, downturns in the housing
markets would adversely affect the ability of seniors to afford
our resident fees as our customers frequently use the proceeds
from the sale of their homes to cover the cost of our fees. If
we are unable to retain and/or attract seniors with sufficient
income, assets or other resources required to pay the fees
associated with independent and assisted living services, our
revenues and results of operations would decline.
16
The geographic concentration of our facilities could leave
us vulnerable to an economic downturn, regulatory changes or
acts of nature in those areas, resulting in a decrease in our
revenues and results of operations.
On a pro forma basis, for the three months ended March 31,
2005, our facilities located in Florida accounted for
approximately 13% of our revenue, our facilities located in
Illinois accounted for approximately 10% of our revenue and our
facilities located in California accounted for approximately 9%
of our revenue. As a result of this concentration, the
conditions of the economies and the real estate markets, changes
in governmental rules and regulations, particularly with respect
to assisted living facilities, acts of nature and other factors
that may result in a decrease in demand for senior living
services in these states could have an adverse effect on our
revenues and results of operations. In addition, since these
facilities are located in Florida and California, we are
particularly susceptible to revenue loss and damage caused by
hurricanes or other severe weather conditions or natural
disasters such as earthquakes. Any significant loss due to a
natural disaster may not be covered by insurance and may lead to
an increase in the cost of insurance.
Termination of our resident agreements and vacancies in
the living spaces we lease could adversely affect our revenues
and earnings.
State regulations governing assisted living facilities require
written resident agreements with each resident. Several of these
regulations also require that each resident have the right to
terminate the resident agreement for any reason on reasonable
notice. Consistent with these regulations, several of our
assisted living resident agreements allow residents to terminate
their agreements upon 0 to 30 days' notice. Unlike
typical apartment leasing or independent living arrangements
that involve lease agreements with specified leasing periods of
up to a year or longer, in many instances we cannot contract
with our assisted living residents to stay in those living
spaces for longer periods of time. Our independent living
resident agreements generally provide for termination of the
lease upon death or allow a resident to terminate his or her
lease upon the need for a higher level of care not provided at
the facility. The resident is usually obligated to pay rent for
the lesser of 60 days after the move out or until the unit
is rented by another resident. If multiple residents terminate
their resident agreements at or around the same time, our
revenues, earnings and occupancy levels could be adversely
affected. In addition, because of the demographics of our
typical residents, including age and health, resident turnover
rates in our facilities are difficult to predict. As a result,
the living spaces we lease may be unoccupied for a period of
time, which could adversely affect our revenues and earnings.
Early termination or non-renewal of our management
agreements could cause a loss in revenues and could negatively
impact earnings.
Approximately 0.5% of our revenues were generated through
third-party management agreements for the three months ended
March 31, 2005. Our third-party management agreements
generally have terms of one to five years. In some cases,
subject to our rights to cure defaults, a facility owner may
terminate us as manager if any licenses or certificates
necessary for operation are revoked or upon the sale of the
facility. Under our management agreements in connection with
sale-leaseback transactions, we cannot be terminated as manager
unless we default under the related lease or are otherwise
terminated for cause under the related lease. Early termination
or non-renewal of our management agreements, or renewal on less
favorable terms, could cause a loss in revenues and could
negatively impact earnings.
Increased competition for or a shortage of skilled
personnel could increase our staffing and labor costs.
Our success depends on our ability to retain and attract skilled
management personnel who are responsible for the day-to-day
operations of each of our facilities. Each facility has an
Executive Director or Residence Director, each a Director,
responsible for the overall day-to-day operations of
17
the facility, including quality of care, social services and
financial performance. Depending upon the size of the facility,
each Director is supported by a facility staff member who is
directly responsible for day-to-day care of the residents and
either facility staff or regional support to oversee the
facility's marketing and community outreach programs. Other
key positions supporting each facility may include individuals
responsible for food service, healthcare services, activities,
housekeeping and engineering. We compete with various health
care service providers, including other senior living providers,
in retaining and attracting qualified and skilled personnel.
Increased competition for or a shortage of nurses or other
trained personnel, or general inflationary pressures may require
that we enhance our pay and benefits package to compete
effectively for such personnel. We may not be able to offset
such added costs by increasing the rates we charge to our
residents. If there is an increase in these costs or if we fail
to attract and retain qualified and skilled personnel, our
business and operating results could be harmed.
Departure of our key officers could harm our
business.
Our future success depends, to a significant extent, upon the
continued service of our senior management personnel,
particularly: Mark J. Schulte, our chief executive officer; Mark
W. Ohlendorf, our co-president; John P. Rijos, our co-president;
R. Stanley Young, our chief financial officer; and Kristin A.
Ferge, our treasurer. If we were to lose the services of any of
these individuals, our business and financial results could be
adversely affected. See "Management."
Interest rate increases could adversely affect our
earnings.
At March 31, 2005, we had approximately $20.3 million
and $211.2 million of floating-rate debt and lease payment
obligations, respectively, outstanding at a combined
weighted-average floating interest rate of 4.07%. Our unhedged
lease obligations include $180.9 million tied to the
tax-exempt bond rates and are subject to interest rate caps at a
weighted average cap rate of 6.17%. This debt, and any unhedged
floating-rate debt incurred in the future, exposes us to
interest rate risk. Therefore, increases in prevailing interest
rates could increase our payment obligations which would
negatively impact earnings. For example, a 1% increase in
interest rates would increase annual interest expense and lease
expense by approximately $0.2 million and $2.1 million
based on the amount of unhedged floating-rate debt and leases,
respectively.
We may not be able to pay or maintain dividends.
In                     2005,
we paid a dividend of
$          per
share of our common stock, or an aggregate of
$           million.
We intend to continue to pay regular quarterly dividends to the
holders of our common stock. Our ability to pay and sustain cash
dividends is based on many factors, including our ability to
make and finance acquisitions, our ability to negotiate
favorable lease and other contractual terms, anticipated
operating expense levels, the level of demand for our
units/beds, the rates we charge and actual results that may vary
substantially from estimates. Some of the factors are beyond our
control and a change in any such factor could affect our ability
to pay dividends. We can give no assurance as to our ability to
pay or maintain dividends. We also cannot assure you that the
level of dividends will be maintained or increase over time or
that increases in demand for our units/beds and monthly resident
fees will increase our actual cash available for dividends to
stockholders. We expect that in certain quarters we may pay
dividends that exceed our net income amount for such period as
calculated in accordance with GAAP. See "Dividend
Policy."
Environmental contamination associated with any of the
facilities we own or operate could result in substantial
liabilities to us.
Under various federal, state and local environmental laws, a
current or previous owner or operator of real property, such as
us, may be held liable in certain circumstances for the costs of
investigation, removal or remediation of certain hazardous or
toxic substances, including, among others, petroleum and
materials containing asbestos, that could be located on, in, at
or under a
18
property, regardless of how such materials came to be located
there. Additionally, such an owner or operator of real property
may incur costs relating to the release of hazardous or toxic
substances, including government fines and payments for personal
injuries or damage to adjacent property. The cost of any
required investigation, remediation, removal, mitigation,
compliance, fines or personal or property damages and our
liability therefore could exceed the property's value
and/or our assets' value. In addition, the presence of such
substances, or the failure to properly dispose of or remediate
the damage caused by such substances, may adversely affect our
ability to sell such property, to attract additional residents
and retain existing residents, to borrow using such property as
collateral or to develop or redevelop such property. In
addition, such laws impose liability for investigation,
remediation, removal and mitigation costs on persons who
disposed of or arranged for the disposal of hazardous substances
at third party sites. Such laws and regulations often impose
liability without regard to whether the owner or operator knew
of, or was responsible for, the presence, release or disposal of
such substances as well as without regard to whether such
release or disposal was in compliance with law at the time it
occurred. Moreover, the imposition of such liability upon us
could be joint and several, which means we could be required to
pay for the cost of cleaning up contamination caused by others
who have become insolvent or otherwise judgment proof. We do not
believe that we have incurred such liabilities as would have a
material adverse effect on our business, financial condition and
results of operations.
Failure to comply with existing environmental laws could
harm our business and financial condition.
Our operations are subject to regulation under various federal,
state and local environmental laws, including those relating to:
the handling, storage, transportation, treatment and disposal of
medical waste products generated at our facilities;
identification and warning of the presence of
asbestos-containing materials in buildings, as well as removal
of such materials; the presence of other substances in the
indoor environment; and protection of the environment and
natural resources in connection with development or construction
of our properties.
Some of our facilities generate infectious or other hazardous
medical waste due to the illness or physical condition of the
residents, including, for example, blood-soaked bandages, swabs
and other medical waste products and incontinence products of
those residents diagnosed with an infectious disease. The
management of infectious medical waste, including its handling,
storage, transportation, treatment and disposal, is subject to
regulation under various federal, state and local environmental
laws. These environmental laws set forth the management
requirements for such waste, as well as related permit,
record-keeping, notice and reporting obligations. Each of our
facilities has an agreement with a waste management company for
the proper disposal of all infectious medical waste. The use of
such waste management companies does not immunize us from
alleged violations of such medical waste laws for operations for
which we are responsible even if carried out by such waste
management companies, nor does it immunize us from third-party
claims for the cost to cleanup disposal sites at which such
wastes have been disposed. Any finding that we are not in
compliance with environmental laws could adversely affect our
business operations and financial condition.
Federal regulations require building owners and those exercising
control over a building's management to identify and warn,
via signs and labels, their employees and certain other
employers operating in the building of potential hazards posed
by workplace exposure to installed asbestos-containing materials
and potential asbestos-containing materials in their buildings.
The regulations also set forth employee training, record-keeping
requirements and sampling protocols pertaining to
asbestos-containing materials and potential asbestos-containing
materials. Significant fines can be assessed for violation of
these regulations. Building owners and those exercising control
over a building's management may be subject to an increased
risk of personal injury lawsuits by workers and others exposed
to asbestos-containing materials and potential
asbestos-containing materials. The regulations may affect the
value of a building containing asbestos-containing materials and
19
potential asbestos-containing materials in which we have
invested. Federal, state and local laws and regulations also
govern the removal, encapsulation, disturbance, handling and/or
disposal of asbestos-containing materials and potential
asbestos-containing materials when such materials are in poor
condition or in the event of construction, remodeling,
renovation or demolition of a building. Such laws may impose
liability for improper handling or a release to the environment
of asbestos-containing materials and potential
asbestos-containing materials and may provide for fines to, and
for third parties to seek recovery from, owners or operators of
real properties for personal injury or improper work exposure
associated with asbestos-containing materials and potential
asbestos-containing materials.
The presence of mold, lead-based paint, contaminants in drinking
water, radon and/or other substances at any of the facilities we
own or may acquire may lead to the incurrence of costs for
remediation, mitigation or the implementation of an operations
and maintenance plan. Furthermore, the presence of mold,
lead-based paint, contaminants in drinking water, radon and/or
other substances at any of the facilities we own or may acquire
may present a risk that third parties will seek recovery from
the owners, operators or tenants of such properties for personal
injury or property damage. In some circumstances, areas affected
by mold may be unusable for periods of time for repairs, and
even after successful remediation, the known prior presence of
extensive mold could adversely affect the ability of a facility
to retain or attract residents and could adversely affect a
facility's market value.
We believe that we are in material compliance with applicable
environmental laws.
We are unable to predict the future course of federal, state and
local environmental regulation and legislation. Changes in the
environmental regulatory framework could have a material adverse
effect on our business. In addition, because environmental laws
vary from state to state, expansion of our operations to states
where we do not currently operate may subject us to additional
restrictions on the manner in which we operate our facilities.
Risks Related to Our Industry
Our business may be adversely affected by increasing
regulation and enforcement.
The regulatory environment surrounding the senior living
industry continues to intensify in the amount and type of laws
and regulations affecting it. In addition, federal, state and
local officials are increasingly focusing their efforts on
enforcement of these laws. This is particularly true for large
for-profit, multi-facility providers like us. Some of the laws
and regulations that impact our industry include: state and
local laws impacting licensure, protecting consumers against
deceptive practices, and generally affecting the
facilities' management of property and equipment and how we
otherwise conduct our operations, such as fire, health and
safety laws and regulations and privacy laws; federal and state
laws designed to protect Medicare and Medicaid, which mandate
what are allowable costs, pricing, quality of services, quality
of care, food service, resident rights (including abuse and
neglect) and fraud; federal and state residents' rights
statutes and regulations; federal and state laws as to referral
payments and self-referrals, and Anti-Kickback and physicians
self-referral ("Stark") laws; and safety and health
standards set by the Occupational Safety and Health
Administration. We are unable to predict the future course of
federal, state and local legislation or regulation. Changes in
the regulatory framework could have a material adverse effect on
our business.
Many senior living facilities are also subject to regulation and
licensing by state and local health and social service agencies
and other regulatory authorities. Although requirements vary
from state to state, these requirements generally address:
personnel education, training and records; facility services,
including administration of medication, assistance with
self-administration of medication and the provision of nursing
services; staffing levels; monitoring of resident wellness;
physical plant specifications; furnishing of resident units;
food and housekeeping services; emergency evacuation plans;
professional licensing and certification of staff prior to
beginning employment; and resident
20
rights and responsibilities, including in some states the right
to receive health care services from providers of a
resident's choice that are not our employees. In several of
the states in which we operate or may operate, we are prohibited
from providing certain higher levels of senior care services
without first obtaining the appropriate licenses. In addition,
in several of the states in which we operate or intend to
operate, assisted living facilities and skilled nursing
facilities require a certificate of need before the facility can
be opened or the services at an existing facility can be
expanded. In most states, senior living facilities also are
subject to state or local building, zoning, fire and food
service codes and must be in compliance with these local codes
before licensing or certification may be granted. These laws and
regulatory requirements could affect our ability to expand into
new markets and to expand our services and facilities in
existing markets. In addition, if any of our presently licensed
facilities operates outside of its licensing authority, it may
be subject to penalties, including closure of the facility.
The intensified regulatory and enforcement environment impacts
providers like us because of the increase in the number of
inspections or surveys by governmental authorities and
consequent citations for failure to comply with regulatory
requirements. Unannounced surveys or inspections may occur
annually or bi-annually, or following a state's receipt of
a complaint about the facility. From time to time in the
ordinary course of business, we receive deficiency reports from
state regulatory bodies resulting from such inspections or
surveys. Most inspection deficiencies are resolved through an
agreed-to plan of corrective action relating to the
facility's operations, but the reviewing agency typically
has the authority to take further action against a licensed or
certified facility, which could result in the imposition of
fines, imposition of a provisional or conditional license,
suspension or revocation of a license, suspension or denial of
admissions, loss of certification as a provider under federal
health care programs or imposition of other sanctions, including
criminal penalties. Loss, suspension or modification of a
license may also cause us to default under our leases and/ or
trigger cross-defaults. Sanctions are taken against providers or
facilities without regard to the providers' or
facilities' history of compliance. We may also expend
considerable resources to respond to federal and state
investigations or other enforcement action under applicable laws
or regulations. To date, none of the deficiency reports received
by us has resulted in a suspension, fine or other disposition
that has had a material adverse effect on our revenues. However,
any future substantial failure to comply with any applicable
legal and regulatory requirements could result in a material
adverse effect to our business as a whole. In addition, state
Attorney Generals vigorously enforce consumer protection laws as
those laws relate to the senior living industry. State Medicaid
Fraud and Abuse Units investigate assisted living facilities
even if the facility or any of its residents do not receive
federal or state funds.
Regulation of the senior living industry is evolving because of
the growing interests of a variety of advocacy organizations and
political movements attempting to standardize regulations for
certain segments of the industry, specifically assisted living.
Our operations could suffer if future regulatory developments,
such as federal assisted living laws and regulations, as well as
mandatory increases in the scope and severity of deficiencies
determined by survey or inspection officials, increase the
number of citations that can result in civil or criminal
penalties. Current laws and regulations allow enforcement
officials to make determinations on whether the care provided by
one or more of our facilities exceeds the level of care for
which the facility is licensed. A facility found delivering care
beyond its license might result in the immediate transfer and
discharge of residents, which creates market instability for a
provider having several facilities in the region. Furthermore,
many state regulations allow citations in one facility to impact
other facilities in the state in the effort to
"control" the big for-profit providers. Revocation of
a license at a given facility could therefore impact our ability
to obtain new licenses or to renew existing licenses at other
facilities, which may also cause us to be in default under our
leases and trigger cross-defaults or may also trigger defaults
under certain of our credit agreements, or adversely affect our
ability to obtain financing in the future. If a state were to
find that one facility's citation will impact another of
our facilities, this will also increase costs and result in
increased surveillance by the state survey agency. If regulatory
requirements increase, whether through enactment of new laws or
regulations or changes in the enforcement of
21
existing rules including increased enforcement brought about by
advocacy groups, in addition to federal and state regulators,
our operations could be adversely affected. In addition, any
adverse finding by survey and inspection officials may serve as
the basis for false claims lawsuits by private plaintiffs and
may lead to investigations under Anti-Kickback or Stark laws,
which may result in civil or criminal penalties against the
facility or individual.
There are various extremely complex federal and state laws
governing a wide array of referrals, relationships and
arrangements and prohibiting fraud by health care providers,
including those in the senior living industry, and governmental
agencies are devoting increasing attention and resources to such
anti-fraud initiatives. The Health Insurance Portability and
Accountability Act of 1996, or HIPAA, and the Balanced Budget
Act of 1997 expanded the penalties for health care fraud. In
addition, with respect to our participation in federal health
care reimbursement programs, the government or private
individuals acting on behalf of the government may bring an
action under the False Claims Act alleging that a health care
provider has defrauded the government and seek treble damages
for false claims and the payment of additional monetary civil
penalties. Recently, other health care providers have faced
enforcement action under the False Claims Act. The False Claims
Act allows a private individual with knowledge of fraud to bring
a claim on behalf of the federal government and earn a
percentage of the federal government's recovery. Because of
these incentives, so-called "whistleblower" suits have
become more frequent. Also, if any of our facilities exceeds its
level of care, we may be subject to private lawsuits alleging
"transfer trauma" by residents. Such allegations could
also lead to investigations by enforcement officials, which
could result in penalties, including the closure of facilities.
The violation of any of these regulations may result in the
imposition of fines or other penalties that could jeopardize our
business.
Additionally, in several states, we operate facilities that
participate in federal and/or state health care reimbursement
programs, including state Medicaid waiver programs for assisted
living facilities and the Medicare skilled nursing facility
benefit program, or other federal and/or state health care
programs. Consequently, we are subject to federal and state laws
that prohibit anyone from presenting, or causing to be
presented, claims for reimbursement which are false, fraudulent
or are for items or services that were not provided as claimed.
Violation of any of these laws can result in loss of licensure,
civil or criminal penalties and exclusion of health care
providers or suppliers from furnishing covered items or services
to beneficiaries of the applicable federal and/or state health
care reimbursement program. Loss of licensure may also cause us
to default under our leases and/or trigger cross-defaults.
Similar state laws vary from state to state, are sometimes vague
and have rarely been interpreted by courts or regulatory
agencies. We cannot be sure that these laws will be interpreted
consistently or in keeping with past practices.
We are also subject to certain federal and state laws that
regulate financial arrangements by health care providers, such
as the Federal Anti-Kickback Law. This law makes it unlawful for
any person to offer or pay (or to solicit or receive) "any
remuneration ... directly or indirectly, overtly or covertly, in
cash or in kind" for referring or recommending for purchase
any item or service which is eligible for payment under the
Medicare and/or Medicaid programs. Authorities have interpreted
this statute very broadly to apply to many practices and
relationships between health care providers and sources of
patient referral. If a health care provider were to violate the
Anti-Kickback Law, it may face criminal penalties and civil
sanctions, including fines and possible exclusion from
government programs such as Medicare and Medicaid, which may
also cause us to default under our leases and/or trigger
cross-defaults. Adverse consequences may also result if we
violate federal Stark laws related to Medicare and Medicaid
physician self-referrals. While we endeavor to comply with all
laws that regulate the licensure and operation of our senior
living communities, it is difficult to predict how our revenues
could be affected if we were subject to an action alleging such
violations.
We are also subject to federal and state laws designed to
protect the confidentiality of patient health information. The
U.S. Department of Health and Human Services, or HHS, has
issued rules pursuant to HIPAA relating to the privacy of such
information. Rules that became effective April 14, 2003
govern our use and disclosure of health information at certain
HIPAA covered facilities. We
22
established procedures to comply with HIPAA privacy requirements
at these facilities. The HIPAA rule establishing administrative,
physical and technical security standards for health information
became effective in April 2005. To the best of our knowledge, we
are in compliance with this rule. Although both current and
pending HIPAA requirements affect the manner in which we handle
health data and communicate with payors at covered facilities,
we believe that the cost of compliance will not have a material
adverse effect on our business, financial condition or results
of operations.
Compliance with the Americans with Disabilities Act, Fair
Housing Act and fire, safety and other regulations may require
us to make unintended expenditures which could adversely affect
our results of operations or financial condition and our ability
to pay dividends to stockholders.
All of our facilities are required to comply with the Americans
with Disabilities Act, or ADA. The ADA has separate compliance
requirements for "public accommodations" and
"commercial properties," but generally requires that
buildings be made accessible to people with disabilities.
Compliance with ADA requirements could require removal of access
barriers and non-compliance could result in imposition of
government fines or an award of damages to private litigants.
In addition, we are required to operate our facilities in
compliance with applicable fire and safety regulations, building
codes and other land use regulations and food licensing or
certification requirements as they may be adopted by
governmental agencies and bodies from time to time. Like other
health care facilities, senior living facilities are subject to
periodic survey or inspection by governmental authorities to
assess and assure compliance with regulatory requirements.
Surveys occur on a regular (often annual or bi-annual) schedule,
and special surveys may result from a specific complaint filed
by a resident, a family member or one of our competitors. We may
be required to make substantial capital expenditures to comply
with those requirements, and these expenditures could adversely
affect our results of operations or financial condition and our
ability to pay dividends to stockholders.
We must also comply with the Fair Housing Act, whereby we will
not discriminate in any of our practices that would cause
individuals to face barriers in gaining residency in any of our
facilities. Additionally, the Fair Housing Act and other state
laws require that we advertise our services in such a way that
we promote diversity and not limit it. We may be required to
change our marketing techniques to comply with these
requirements. These expenditures could adversely affect our
operations or financial condition as discussed above.
Significant legal actions and liability claims against us
in excess of insurance limits could subject us to increased
operating costs and substantial uninsured liabilities, which may
adversely affect our financial condition and operating
results.
The senior living business entails an inherent risk of
liability, particularly given our residents' demographics,
including age and health, and the services we provide. In recent
years, we, as well as other participants in our industry, have
been subject to an increasing number of claims and lawsuits
alleging that our services have resulted in resident injury or
other adverse effects. Many of these lawsuits involve large
damage claims and significant legal costs. Many states continue
to consider tort reform and how it will apply to the senior
living industry. We may continue to be faced with the threat of
large jury verdicts in jurisdictions that do not find favor with
large senior living providers. We maintain liability insurance
policies in amounts and with the coverage and deductibles we
believe are adequate based on the nature and risks of our
business, historical experience and industry standards.
We currently maintain the following liability insurance: a
$25.0 million primary limit of general and healthcare
professional liability insurance coverage, inclusive of at least
a $15.0 million sub-limit of healthcare professional
liability ($25.0 million sub-limit for designated
locations). This insurance coverage is on a per claim and
aggregate basis with a self-insured retention of
$1.0 million. The
23
general and professional liability coverage is arranged on a
three-year, shared-limit basis, with a pre-negotiated
reinstatement of limit provision that will allow for the
re-purchase of the lead $15.0 million of general and
professional liability coverage, at a set additional premium,
should adverse claims experience be realized during the policy
term. In addition to this $25.0 million primary limit, we
have arranged $25.0 million excess general liability-only
insurance coverage on a per claim and aggregate basis.
Additionally, we maintain primary workers' compensation
insurance, which includes a $0.5 million deductible per
occurrence, employer's liability and auto liability
insurance in compliance with statutory limits and requirements
and a $20.0 million excess auto liability and
employer's liability coverage, over a primary auto and
employer's liability $1.0 million policy limit, on a
per-occurrence, annual aggregate basis.
We also currently maintain the following property insurance: a
$300.0 million per-occurrence primary policy limit, which
contains various sub-limits of coverage, most notably for the
perils of flood and earthquake, limited to $50.0 million on
a per-occurrence and annual aggregate basis. Terrorism coverage
is provided for other than the peril of earthquake to the noted
policy limits.
If a successful claim is made against us and it is not covered
by our insurance or exceeds the policy limits, our financial
condition and results of operations could be materially and
adversely affected. In some states, state law may prohibit or
limit insurance coverage for the risk of punitive damages
arising from professional liability and general liability claims
and/or litigation. As a result, we may be liable for punitive
damage awards in these states that either are not covered or are
in excess of our insurance policy limits. Also, the above
deductibles, or self-insured retention, are accrued based on an
actuarial projection of future liabilities. If this projection
is inaccurate and if there are an unexpectedly large number of
successful claims that result in liabilities in excess of our
self-insured retention, our operating results could be
negatively affected. Claims against us, regardless of their
merit or eventual outcome, also could have a material adverse
effect on our ability to attract residents or expand our
business and could require our management to devote time to
matters unrelated to the day-to-day operation of our business.
We also have to renew our policies every year and negotiate
acceptable terms for coverage, exposing us to the volatility of
the insurance markets, including the possibility of rate
increases. There can be no assurance that we will be able to
obtain liability insurance in the future or, if available, that
such coverage will be available on acceptable terms.
Overbuilding, increased competition and increased
operating costs may adversely affect our business.
The senior living industry is highly competitive, and we expect
that it may become more competitive in the future. We compete
with numerous other companies that provide long-term care
alternatives such as home healthcare agencies, life care at
home, facility-based service programs, retirement communities,
convalescent centers and other independent living, assisted
living and skilled nursing providers, including not-for-profit
entities. In general, regulatory and other barriers to
competitive entry in the independent living and assisted living
segments of the senior living industry are not substantial,
except in the skilled nursing segment. We have experienced and
expect to continue to experience increased competition in our
efforts to acquire and operate senior living facilities.
Consequently, we may encounter increased competition that could
limit our ability to attract new residents, raise resident fees
or expand our business, which could have a material adverse
effect on our revenues and earnings.
In addition, recent overbuilding in the senior living industry
has reduced the occupancy rates of newly constructed buildings
and, in some cases, reduced the monthly rate that many newly
built and previously existing facilities are able to obtain for
their services. This has resulted in lower revenues for certain
of our facilities over the past several years. While we believe
that overbuilt markets should
24
be stabilized for the immediate future, we cannot be certain
that we will be able to achieve occupancy and rate levels that
will sustain our revenue growth.
Risks Related to Our Organization and Structure
If the ownership of our common stock continues to be
highly concentrated, it may prevent you and other stockholders
from influencing significant corporate decisions and may result
in conflicts of interest.
Following the completion of this offering, entities affiliated
with Fortress will beneficially own 43,157,000 shares, or
over 60%, of our common stock. As a result, Fortress will be
able to control fundamental and significant corporate matters
and transactions, including: the election of directors; mergers,
consolidations or acquisitions; the sale of all or substantially
all of our assets and other decisions affecting our capital
structure; the amendment of our amended and restated certificate
of incorporation and amended and restated by-laws; and the
dissolution of the Company. Fortress' interests may
conflict with your interests. Their control of the Company could
delay, deter or prevent acts that may be favored by our other
stockholders such as hostile takeovers, changes in control of
the Company and changes in management. See "Certain
Relationships and Related Party Transactions —
Agreements With Stockholders." As a result of such actions,
the market price of our common stock could decline or
stockholders might not receive a premium for their shares in
connection with a change of control of the Company. See
"Description of Capital Stock — Anti-Takeover
Effects of Delaware Law, Our Amended and Restated Certificate of
Incorporation and Our Amended and Restated By-Laws."
Anti-takeover provisions in our amended and restated
certificate of incorporation and our amended and restated
by-laws could have effects that conflict with the interests of
our stockholders.
Certain provisions of our amended and restated certificate of
incorporation and our amended and restated by-laws may
discourage, delay or prevent a merger or acquisition that you
may consider favorable or prevent the removal of our current
board of directors and management. We have a number of
anti-takeover devices in place that will hinder takeover
attempts, including:
•
a staggered board of directors consisting of three classes of
    directors, each of whom serve three-year terms;
•
removal of directors only for cause, by 50.1% of the voting
    interest of stockholders entitled to vote;
•
blank-check preferred stock;
•
provisions in our amended and restated certificate of
    incorporation and amended and restated by-laws preventing
    stockholders from calling special meetings (with the exception
    of Fortress and its affiliates, so long as they collectively
    beneficially own at least 50.1% of our issued and outstanding
    common stock);
•
advance notice requirements for stockholders with respect to
    director nominations and actions to be taken at annual
    meetings; and
•
no provision in our amended and restated certificate of
    incorporation for cumulative voting in the election of
    directors, which means that the holders of a majority of the
    outstanding shares of our common stock can elect all the
    directors standing for election.
Additionally, our amended and restated certificate of
incorporation provides that Section 203 of the Delaware
General Corporation Law, which restricts certain business
combinations with interested stockholders in certain situations,
will not apply to us. This may make it easier for a third party
to acquire an interest in some or all of us with Fortress'
approval, even though our other stockholders may not deem such
an acquisition beneficial to their interests.
25
See "Description of Capital Stock — Anti-Takeover
Effects of Delaware Law, Our Amended and Restated Certificate of
Incorporation and Our Amended and Restated By-Laws."
We are a holding company with no operations.
We are a holding company with no material direct operations. Our
principal assets are the equity interests we directly or
indirectly hold in our operating subsidiaries. As a result, we
are dependent on loans, dividends and other payments from our
subsidiaries to generate the funds necessary to meet our
financial obligations. Our subsidiaries are legally distinct
from us and have no obligation to make funds available to us.
Risks Related to This Offering
An active market for our shares of common stock may never
develop.
Prior to this offering, there has been no public market for our
common stock. We plan to submit an application to have our
common stock approved for quotation on New York Stock Exchange
under the symbol "BKD." However, we cannot assure you
that regular trading of shares of our common stock will develop
on that exchange or elsewhere or, if developed, that any market
will be active or sustained. Accordingly, we cannot assure you
of the liquidity of any such market, your ability to sell your
shares of common stock or the prices that you may obtain for
your shares of common stock.
The market price and trading volume of our common stock
may be volatile, which could result in rapid and substantial
losses for our stockholders.
Even if an active trading market develops, the market price of
our common stock may be highly volatile and could be subject to
wide fluctuations. In addition, the trading volume in our common
stock may fluctuate and cause significant price variations to
occur. If the market price of our common stock declines
significantly, you may be unable to resell your shares at or
above your purchase price. We cannot assure you that the market
price of our common stock will not fluctuate or decline
significantly in the future. Some of the factors that could
negatively affect our share price or result in fluctuations in
the price or trading volume of our common stock include:
•
variations in our quarterly operating results;
•
changes in our earnings estimates;
•
the contents of published research reports about us or the
    senior living industry or the failure of securities analysts to
    cover our common stock after this offering;
•
additions or departures of key management personnel;
•
any increased indebtedness we may incur or lease obligations we
    may enter into in the future;
•
actions by institutional stockholders;
•
changes in market valuations of similar companies;
•
announcements by us or our competitors of significant contracts,
    acquisitions, strategic partnerships, joint ventures or capital
    commitments;
•
speculation or reports by the press or investment community with
    respect to the Company or the senior living industry in general;
•
increases in market interest rates that may lead purchasers of
    our shares to demand a higher yield;
•
changes or proposed changes in laws or regulations affecting the
    senior living industry or enforcement of these laws and
    regulations, or announcements relating to these matters; and
26
•
general market and economic conditions.
Future offerings of debt or equity securities by us may
adversely affect the market price of our common stock.
In the future, we may attempt to increase our capital resources
by offering debt or additional equity securities, including
commercial paper, medium-term notes, senior or subordinated
notes, series of preferred shares or shares of our common stock.
Upon liquidation, holders of our debt securities and preferred
shares, and lenders with respect to other borrowings, would
receive a distribution of our available assets prior to the
holders of our common stock. Additional equity offerings may
dilute the economic and voting rights of our existing
stockholders or reduce the market price of our common stock, or
both. Preferred shares, if issued, could have a preference with
respect to liquidating distributions or a preference with
respect to dividend payments that could limit our ability to pay
dividends to the holders of our common stock. Because our
decision to issue securities in any future offering will depend
on market conditions and other factors beyond our control, we
cannot predict or estimate the amount, timing or nature of our
future offerings. Thus, holders of our common stock bear the
risk of our future offerings reducing the market price of our
common stock and diluting their share holdings in us.
After this offering, assuming the exercise in full by the
underwriters of their over allotment option, we will have an
aggregate
of                      shares
of common stock authorized but unissued and not reserved for
issuance under our option plans. We may issue all of these
shares without any action or approval by our stockholders. We
intend to continue to actively pursue acquisitions of senior
living facilities and may issue shares of common stock in
connection with these acquisitions. Any shares issued in
connection with our acquisitions, the exercise of outstanding
stock options or otherwise would dilute the holdings of the
investors who purchase our shares in this offering.
The market price of our common stock could be negatively
affected by sales of substantial amounts of our common stock in
the public markets.
After this offering, there will
be                      shares
of our common stock outstanding. There will
be                      shares
outstanding if the underwriters exercise their over allotment
option in full. All the shares of our common stock sold in this
offering will be freely transferable, except for any shares held
by our "affiliates," as that term is defined in
Rule 144 under the Securities Act of 1933, as amended, or
the Securities Act. See "Shares Eligible For Future
Sale."
Pursuant to our Stockholders Agreement, Fortress and Health
Partners, and certain of their related partnerships and
permitted third-party transferees have the right, in certain
circumstances, to require us to register their shares of our
common stock under the Securities Act for sale into the public
markets. Upon the effectiveness of such a registration
statement, all shares covered by the registration statement will
be freely transferable. In addition, in the event that Emeritus
and NW Select are unable to sell all of the shares of our common
stock offered by them in this offering, we have agreed to enter
into a registration rights agreement with them immediately after
the consummation of this offering. See "Certain
Relationships and Related Party Transactions —
Agreements With Stockholders."
We and our executive officers, directors and stockholders
holding           %
or more of our outstanding common stock have agreed with the
underwriters that, subject to limited exceptions, for a period
of 120 days after the date of this prospectus, we and they
will not directly or indirectly offer, pledge, sell, contract to
sell, sell any option or contract to purchase or otherwise
dispose of any shares of our common stock, or any securities
convertible into or exercisable or exchangeable for shares of
our common stock, or in any manner transfer all or a portion of
the economic consequences associated with the ownership of
shares of our common stock, or cause a registration statement
covering any shares of our common stock to be filed, without the
prior written consent of the representatives. The
representatives may waive these restrictions in their discretion.
27
In addition, following the completion of this offering, we
intend to file a registration statement on Form S-8 under
the Securities Act to register an aggregate
of                      shares
of our common stock reserved for issuance under our stock
incentive programs. Subject to any restrictions imposed on the
shares and options granted under our stock incentive programs,
shares registered under the registration statement on
Form S-8 will be available for sale into the public
markets, subject to the 120-day lock-up agreements described
above. All participants in the directed shares program described
under "Underwriting" have also agreed to similar
restrictions on the ability to sell their common stock.
Investors in this offering will suffer immediate and
substantial dilution.
The initial public offering price of our common stock is
substantially higher than the net tangible book value per share
of our common stock outstanding immediately after this offering.
Our net tangible book value per share as of March 31, 2005
was approximately $187.48. Our net tangible book value per share
as of March 31, 2005 represents our total assets minus
intangible assets, deferred finance costs and total liabilities
less deferred gains, divided by the 1,001,000 shares of our
common stock that were outstanding on March 31, 2005.
Investors who purchase our common stock in this offering will
pay a price per share that substantially exceeds the net
tangible book value per share of our common stock. If you
purchase our common stock in this offering, you will experience
immediate and substantial dilution of
$          in
the net tangible book value per share of our common stock, based
upon the initial public offering price of
$           per
share, which represents the mid-point of the range set forth on
the cover page of this prospectus. Investors who purchase our
common stock in this offering will have
purchased      % of the shares
outstanding immediately after the offering, but will have
paid      % of the total consideration
for those shares.
Market interest rates may have an effect on the value of
our common stock.
One of the factors that investors may consider in deciding
whether to buy or sell our common stock is our dividend payment
per share as a percentage of our share price relative to market
interest rates. If market interest rates increase, prospective
investors may desire a higher rate of return on our common stock
and seek securities paying higher dividends or interest or
offering a higher rate of return. As a result, interest rate
fluctuations and capital market conditions can affect the demand
for and market value of our common stock. For instance, if
interest rates rise, it is likely that the market price of our
common stock will decrease, because current stockholders and
potential investors will likely require a higher dividend yield
and rate of return on our common stock as interest-bearing
securities, such as bonds, offer more attractive returns.
28
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary,"
"Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
"Business" and elsewhere in this prospectus may
contain forward-looking statements which reflect our current
views with respect to, among other things, future events and
financial performance. You can identify these forward-looking
statements by the use of forward-looking words such as
"outlook," "believes," "expects,"
"potential," "continues," "may,"
"will," "should," "seeks,"
"approximately," "predicts,"
"intends," "plans," "estimates,"
"anticipates" or the negative version of those words
or other comparable words. Any forward-looking statements
contained in this prospectus are based upon the historical
performance of our subsidiaries and on our current plans,
estimates and expectations. The inclusion of this
forward-looking information should not be regarded as a
representation by us, the underwriters or any other person that
the future plans, estimates or expectations contemplated by us
will be achieved. Such forward-looking statements are subject to
various risks and uncertainties. Accordingly, there are or will
be important factors that could cause our actual results to
differ materially from those indicated in these statements. We
believe that these factors include but are not limited to a
decrease in the overall demand for senior housing, general
economic conditions and economic conditions in the markets in
which we operate, real estate markets in the regions where our
facilities are located, acquisition risks, competitive pressures
within the industry and/or markets in which we operate, the
creditworthiness of our residents, interest rate fluctuations,
licensing risks, our failure to comply with federal, state and
local laws and regulations, our failure to comply with
environmental laws, the effect of future legislation or
regulatory changes in our operations, and other factors
described in the section entitled "Risk Factors"
beginning on page 12 of this prospectus. These factors
should not be construed as exhaustive and should be read in
conjunction with the other cautionary statements that are
included in this prospectus. We do not undertake any obligation
to publicly update or review any forward-looking statement,
whether as a result of new information, future developments or
otherwise.
If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be
incorrect, actual results may vary materially from what we may
have projected. Any forward-looking statements you read in this
prospectus reflect our current views with respect to future
events and are subject to these and other risks, uncertainties
and assumptions relating to our operations, results of
operations, financial condition, growth strategy and liquidity.
You should specifically consider the factors identified in this
prospectus that could cause actual results to differ before
making an investment decision.
29
USE OF PROCEEDS
The net proceeds to us from the sale
of                      shares
of common stock offered by the Company hereby are estimated to
be approximately
$          ,
assuming an initial public offering price of
$          per
share (the midpoint of the price range set forth on the cover
page of this prospectus) and after deducting the estimated
underwriting discounts and commissions and offering expenses
payable by us. We expect to use the net proceeds for repayment
of certain of our outstanding indebtedness as described below,
acquisition of additional senior living operating companies and
facilities, including the acquisition of six facilities pursuant
to a purchase option as described below, and other general
corporate purposes. Pending these uses, we intend to invest the
net proceeds in short-term interest-bearing instruments or money
market accounts.
We intend to use approximately $9.7 million of the net
proceeds from this offering towards the purchase price of
approximately $19.4 million (net of a $1.0 million
lease deposit and including closing costs) exercise our purchase
option with respect to six facilities that Alterra currently
leases from Omega Healthcare Investors, Inc. and certain of its
affiliates. We expect to raise an additional $10.0 million
of debt to fund the remainder of the purchase price. Upon our
exercise of the purchase option, the leases and all other
related agreements effecting these properties will be terminated.
We intend to use approximately $62.2 million of the net
proceeds from this offering to repay the following indebtedness
and $2.2 million of the following lessor advances:
•
Approximately $8.1 million to repay in full the debt
    outstanding under a first mortgage loan encumbering our Westbury
    Care Center facility. The loan bears interest at the rate of
    prime plus 0.75% and is due March 31, 2008. The loan can be
    prepaid without penalty.
•
Approximately $32.0 million to repay the notes B
    portion of our $182.0 million first mortgage loan entered
    into in March 2005 with Guaranty Bank, which is secured by five
    facilities located in Illinois, North Carolina, Missouri, Ohio
    and New York. BLC used the proceeds of the loan to refinance the
    existing indebtedness on these five facilities, including
    repayment in full of a first mortgage loan and a mezzanine loan
    encumbering The Hallmark at Battery Park City in the amount of
    $50.0 million and $8.5 million, respectively. The
    notes B can be prepaid, subject to a prepayment fee equal
    to 1% of the principal being repaid. The loan matures on
    April 1, 2008, and may be extended for two additional
    one-year periods, subject to certain covenants. The
    $182.0 million loan is allocated between
    $150.0 million in notes A, which bear interest at
    LIBOR plus 3.05%, and $32.0 million in notes B, which
    bear interest at LIBOR plus 5.60%. At the end of the 12th and
    24th calendar months, the notes B can be resized to
    notes A, in which case the notes A interest rate
    increases to LIBOR plus 3.10% and the notes B interest rate
    increases to LIBOR plus 6.60% and increases 1.00% annually
    thereafter.
•
Approximately $10.0 million to repay in full our term loan
    from LaSalle Bank National Association that is payable interest
    only monthly at the rate of prime plus 1.00% and the principal
    of which is due in quarterly installments of $0.5 million
    commencing July 1, 2005 until maturity on March 31,
    2007. The loan can be prepaid without penalty.
•
Approximately $2.9 million to repay in full the debt
    outstanding related to taxable bonds encumbering four Alterra
    facilities located in Kansas. The bonds have an average interest
    rate of 7.36% and mature in 2009. The bonds may be prepaid
    without penalty.
•
Approximately $9.2 million to repay unsecured notes that
    were issued in conjunction with Alterra's acquisition of
    joint venture partnership interests. The notes bear interest at
    9.00% and mature in December 2008. The notes may be prepaid
    without penalty, upon five days' notice.
•
Approximately $2.2 million to repay in full lessor advances
    to fund certain escrow deposits required pursuant to underlying
    loan agreements in connection with the Chambrel Portfolio, which
    amount can be repaid at any time during the term of the lease.
    The current lease rate on this amount is 15.86%.
30
We will not receive any proceeds from the sale of
4,172,000 shares of common stock offered hereby by the
selling stockholders.
DIVIDEND POLICY
On           ,
2005, we paid a dividend of
$          per
share of our common stock, or an aggregate of
$           million.
We intend to continue to pay regular quarterly dividends to the
holders of our common stock. The payment of dividends is subject
to the discretion of our board of directors and will depend on
many factors, including our results of operations, financial
condition and capital requirements, earnings, general business
conditions, restrictions imposed by financing arrangements,
legal restrictions on the payment of dividends and other factors
the board of directors deems relevant. In addition, we are a
holding company with no direct operations and depend on loans,
dividends and other payments from our subsidiaries to generate
the funds necessary to pay dividends. We expect that in certain
quarters we may pay dividends that exceed our net income amounts
for such period as calculated in accordance with GAAP.
31
CAPITALIZATION
The following table sets forth our capitalization as
of                     ,
2005:
•
on an actual basis (after giving effect to the formation
    transactions described in "Business —
    History"); and
•
on a pro forma basis to give effect to the sale of shares of our
    common stock in this offering at an assumed offering price
    of             ,
    after deducting offering costs, underwriters' discount and
    sale of common shares by minority stockholders, application of a
    portion of the proceeds from this offering towards repayment of
    certain outstanding indebtedness and exercise of our purchase
    option with respect to six facilities as described in "Use
    of Proceeds," the formation transactions described in
    "Business — History" and payment of a
    $20.0 million dividend by Alterra.
This table contains unaudited information and should be read in
conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our
combined financial statements and the accompanying notes that
appear elsewhere in this prospectus.
As of  , 2005
Pro Forma
Actual
(Dollars in thousands)
Cash and cash equivalents
$
$
Current portion of long-term debt
$
$
Long-term debt
Capital lease obligation
Total debt
$
$
Stockholders' equity:
Preferred stock, $0.01 par
    value: 50,000,000 shares authorized; no shares issued and
    outstanding on an actual and pro forma as adjusted basis
Common stock, $0.01 par value:
    200,000,000 shares authorized on an actual basis and
    58,000,000 shares issued and outstanding on an actual basis
    and            shares
    issued and outstanding on a pro forma as adjusted basis
$
$
Additional paid-in capital
Accumulated earnings (deficit)
Accumulated other comprehensive loss
Total stockholders' equity
$
$
Total capitalization
$
$
32
DILUTION
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the initial public
offering price per share of our common stock and the pro forma
net tangible book value per share of our common stock after this
offering. Net tangible book value per share represents the
amount of book value of our total tangible assets less book
value of our total liabilities, excluding deferred gains,
divided by the number of shares of common stock then outstanding.
Our net tangible book value as of March 31, 2005 was
approximately $187.7 million, or approximately $187.48 per
share based on the 1,001 shares of common stock then
outstanding. After giving effect to our sale of common stock in
this offering at the initial public offering price
of              per
share (the midpoint of the price range set forth on the cover
page of this prospectus), and after deducting estimated
underwriting discounts and estimated offering expenses, our pro
forma net tangible book value as of March 31, 2005 would
have
been              million
based
on                      shares
of common stock,
or           per
share (assuming no exercise of the underwriters' option to
purchase additional shares). This represents an immediate and
substantial dilution
of           per
share to new investors purchasing common stock in this offering.
The following table illustrates this dilution on a per share
basis:
Assumed initial public offering
    price per share
Pro forma net tangible book value
    per share as of March 31, 2005
$
187.48
Decrease in pro forma net tangible
    book value per share attributable to this offering
Pro forma net tangible book value
    per share after giving effect to this offering
Dilution per share to new investors
The following table summarizes, on a pro forma basis as of
March 31, 2005, the total number of shares of common stock
purchased from us, the total consideration paid to us and the
average price of
$          per
share.
Total
Shares Purchased
Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
(in millions)
Existing stockholders
$
$
New investors
100.0%
$
100.0%
$
Total consideration and average price paid by the new investors
in the table above give effect to the $20.0 million cash
dividend paid by FEBC-ALT Investors LLC in June 2005 and the
$           million
dividend which we expect to pay prior to this offering.
33
SELECTED COMBINED HISTORICAL FINANCIAL AND OPERATING DATA
The following table sets forth our selected historical combined
financial data as of and for each of the years in the five-year
period ended December 31, 2004 and for the three months
ended March 31, 2005 and 2004. The combined financial
statements includes Brookdale Living Communities, Inc. for all
periods presented and Alterra Healthcare Corporation effective
December 1, 2003. You should read this information in
conjunction with the information under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and our historical
combined financial statements and the related notes thereto
included elsewhere in this prospectus. Our historical statement
of operations data and balance sheet data as of and for each of
the years in the five-year period ended December 31, 2004
have been derived from our audited financial statements. Our
historical combined financial statements as of March 31,
2005 and 2004 and for each of the years in the three-year period
ended December 31, 2004 have been included elsewhere in
this prospectus.
Period from
Period from
Three Months
September 20,
January 1,
Ended
2000
2000
March 31,
Year Ended December 31,
through
through
December 31,
September 19,
2005
2004
2004
2003
2002
2001
2000
2000
(unaudited)
Statement of Operations Data (in
    thousands, except per share data):
Revenues
$
174,983
$
155,633
$
660,872
$
222,584
$
161,516
$
123,935
$
28,161
$
86,930
Facility operating expenses
110,328
99,810
415,169
133,119
92,980
72,467
16,692
46,904
Lease expense
46,502
17,825
99,997
30,744
31,003
26,016
6,742
20,923
Depreciation and amortization
5,596
14,597
52,307
22,480
13,708
11,230
2,246
5,904
Amortization of Goodwill
—
—
—
—
—
2,382
595
—
Merger Costs
—
—
—
—
—
—
—
5,410
General and administrative expenses
11,433
10,239
43,640
15,997
12,540
12,138
2,880
6,156
Total operating expenses
173,859
142,471
611,113
202,340
150,231
124,233
29,155
85,297
Income (loss) from operations
1,124
13,162
49,759
20,244
11,285
(298
)
(994
)
1,633
Interest income
362
224
637
14,037
18,004
18,251
3,962
8,346
Interest expense:
Debt
(8,899
)
(18,167
)
(63,634
)
(25,106
)
(9,490
)
(8,247
)
(2,613
)
(7,540
)
Change in fair value of derivatives
4,062
(2,832
)
3,176
—
—
—
—
—
Loss on sale of properties
—
—
—
(24,513
)
—
—
—
—
Loss (gain) on extinguishment
    of debt
(453
)
—
1,051
12,511
—
—
—
—
Equity in earnings (loss) of
    unconsolidated ventures, net of minority interest of $(7), $(6),
    $(6), $11, and — , respectively
(187
)
(373
)
(931
)
318
584
984
—
—
Other
(246
)
(974
)
(114
)
—
—
—
—
—
Income (loss) before taxes
(4,237
)
(8,960
)
(10,056
)
(2,509
)
20,383
10,690
355
2,439
(Provision) benefit for income taxes
(166
)
713
(11,111
)
(139
)
(8,666
)
(4,503
)
(448
)
(2,150
)
Income (loss) before discontinued
    operations and cumulative effect of a change in accounting
    principle
(4,403
)
(8,247
)
(21,167
)
(2,648
)
11,717
6,187
(93
)
289
Loss on discontinued operations
(70
)
(820
)
(722
)
(643
)
—
—
—
—
Cumulative effect of a change in
    accounting principle, net of income taxes of $8,095
—
—
—
(13,208
)
—
—
—
—
Net income (loss)
$
(4,473
)
$
(9,067
)
$
(21,889
)
$
(16,499
)
$
11,717
$
6,187
$
(93
)
$
289
Earnings (loss) per share:
Basic
$
(4.47
)
$
(9.06
)
$
(21.87
)
$
(196.42
)
$
11,717.00
$
6,187.00
$
(93.00
)
$
289.00
Diluted
$
(4.47
)
$
(9.06
)
$
(21.87
)
$
(196.42
)
$
11,717.00
$
6,187.00
$
(93.00
)
$
289.00
34
Period from
Period from
Three Months
September 20,
January 1,
Ended
2000
2000
March 31,
Year Ended December 31,
through
through
December 31,
September 19,
2005
2004
2004
2003
2002
2001
2000
2000
(unaudited)
Weighted average shares outstanding:
Basic
1,001
1,001
1,001
84
1
1
1
1
Diluted
1,001
1,001
1,001
84
1
1
1
1
Other Operating Data:
Number of facilities (at end of
    period)
366
359
367
359
60
51
26
—
Total units operated
26,109
24,423
26,208
24,423
11,334
9,266
5,567
—
Occupancy rate
89.0
%
86.8
%
89.4
%
87.5
%
91.0
%
82.2
%
78.0
%
—
Average monthly revenue per unit
    (same store)
$
2,880
$
2,815
$
2,827
$
2,660
$
2,516
$
2,445
$
2,361
—
As of March 31,
As of December 31,
2005
2004
2004
2003
2002
2001
2000
(unaudited)
Combined Balance Sheet Data (in
    thousands):
Cash and cash equivalents
$
76,083
$
39,271
$
86,858
$
56,468
$
2,172
$
1,067
$
440
Total assets
729,420
1,580,959
746,625
1,656,582
730,298
570,323
531,742
Total debt
383,275
999,914
371,037
1,044,736
290,483
171,236
136,653
Total stockholders' equity
66,605
384,066
71,454
393,133
333,632
321,915
315,728
Note — On September 19, 2000, BLC was acquired by
Fortress Brookdale Acquisition LLC and the purchase price was
pushed down to BLC's consolidated financial statements and
the historical cost adjusted to reflect fair value. Prior to
September 19, 2000, BLC was a public company.
35
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
our "Selected Combined Historical Financial And Operating
Data" and combined financial statements and related notes
appearing elsewhere in this prospectus. In addition to
historical information, this discussion contains forward-looking
statements that involve risks, uncertainties and assumptions
that could cause actual results to differ materially from
management's expectations. Please see "Cautionary
Statement Regarding Forward-Looking Statements" for more
information. Factors that could cause such differences include
those described in "Risk Factors" and elsewhere in
this prospectus.
Executive Overview
We are the third largest operator of senior living facilities in
the United States based on total capacity with over 380
facilities in 32 states and the ability to serve over
30,000 residents. We offer our residents access to a full
continuum of services across all sectors of the senior living
industry. As of June 30, 2005, we operated 81 independent
living facilities with 14,619 units, 291 assisted living
facilities with 12,342 beds, eight continuing care retirement
communities, or CCRCs, with 3,238 units/beds (including 825
resident-owned cottages on our CCRC campuses managed by us) and
one skilled nursing facility with 82 units/beds. The
majority of our units/beds are located in campus settings or
facilities containing multiple services, including CCRCs. As of
June 30, 2005, our facilities were on average 88.1%
occupied. We generate over 98% of our revenues from private pay
customers, which limits our exposure to government reimbursement
risk. In addition, we control the operating economics of our
facilities through property ownership and long-term leases. We
believe we operate in the most attractive sectors of the senior
living industry with significant opportunities to increase our
revenues through providing a combination of housing, hospitality
services and health care services. For the three months ended
March 31, 2005, 13.7% of our revenues were generated from
owned facilities, 85.8% from leased facilities and 0.5% from
management fees from facilities we operate on behalf of third
parties and affiliates.
We were formed in June 2005 for the purpose of combining two
leading senior living operating companies, Brookdale Living
Communities, Inc., or BLC, and Alterra Healthcare Corporation,
or Alterra. BLC and Alterra have been operating independently
since 1986 and 1981, respectively. Since December 2003, BLC and
Alterra have been under the common control of Fortress.
We plan to grow our revenue and operating income through a
combination of: (i) organic growth in our existing
portfolio; (ii) acquisitions of additional operating
companies and facilities; and (iii) the realization of
economies of scale, including those created by the BLC and
Alterra combination. Given the size and breadth of our
nationwide platform, we believe that we are well positioned to
invest in a broad spectrum of assets in the senior living
industry. Since January 2001, we have begun leasing or acquired
the ownership or management of 52 senior living facilities with
approximately 11,000 units/beds. In 2005, we acquired the
ownership or management of 16 senior living facilities with
4,266 units/beds (including 825 resident-owned cottages on
our CCRC campuses managed by us) and an additional facility with
233 units/beds, which is currently under contract for sale.
Our senior living facilities offer residents a supportive
"home-like" setting, assistance with activities of
daily living, or ADLs, and, in a few facilities, licensed
skilled nursing services. By providing residents with a range of
service options as their needs change, we provide greater
continuity of care, enabling seniors to "age-in-place"
and thereby maintain residency with us for a longer period of
time. The ability of residents to age-in-place is also
beneficial to our residents and their families who are burdened
with care decisions for their elderly relatives.
Our independent living facilities' target residents are
senior citizens age 70 and older who desire or need a more
supportive living environment. The average independent living
resident resides in an independent living facility for
30 months. About half of our residents relocate to one of
36
our independent living facilities in order to be in a
metropolitan area that is closer to their adult children. Our
assisted living facilities' target residents are
predominantly female senior citizens age 85 and older who
require assistance with two or three ADLs. The average assisted
living resident resides in an assisted living facility for
21 months. Residents typically enter an assisted living
facility due to a relatively immediate need for services that
might have been triggered by a medical event or need.
Overbuilding in the late 1990s in the senior living industry put
downward pressure on the occupancy rates and the resident fees
of senior living providers. The slowdown in construction and
lack of construction financing since 1999 has led to a reduction
in the supply of new units being constructed. Growing demand for
senior living services has resulted in a trend towards
increasing occupancy rates and resident fees for operators of
existing facilities.
Growing consumer awareness among seniors and their families
concerning the types of services provided by independent and
assisted living operators has further contributed to the
opportunities in the senior living industry. Also, seniors
possess greater financial resources, which makes it more likely
that they are able to afford to live in market-rate senior
housing. Seniors in the geographic areas in which we operate
tend to have a significant amount of assets generated from
savings, pensions and, due to strong national housing markets,
the sale of private homes.
Challenges in our industry include increased state and local
regulation of the assisted living industry, which has led to an
increase in the cost of doing business; the regulatory
environment continues to intensify in the amount and types of
laws and regulations affecting us, accompanied by an increase by
state and local officials in enforcement thereof. In addition,
like other companies, our financial results may be negatively
impacted by increasing employment costs including salaries,
wages and benefits, such as health care, for our employees.
Increases in the costs of utilities and real estate taxes will
also have a negative impact on our financial results.
Formation Transactions
We are a holding company formed in June 2005 for the purpose of
combining, through a series of mergers, two leading senior
living operating companies, BLC and Alterra. The combination of
these two companies created a nationwide operating platform to
grow our existing portfolio, realize economies of scale and add
to our existing portfolio through strategic acquisitions of
existing assets and/or senior living portfolios. In connection
with the combination of BLC and Alterra, we have negotiated new
contracts for food, insurance and other services and will reduce
the size of our corporate workforce through a consolidation of
corporate functions such as accounting, finance, human resources
and legal, which are collectively expected to result in
recurring operating and general and administrative expense
savings, net of additional recurring costs expected to be
incurred as a public company, of between approximately
$13.0 million and $15.0 million per year. We began to
realize these savings upon completion of the formation
transactions
in                     2005.
In addition to the combination of BLC and Alterra, Fortress sold
the Prudential Portfolio to Alterra in exchange for membership
interests in FEBC-ALT Investors LLC, or FEBC-ALT Investors, and
merged the Fortress CCRC Portfolio with and into a wholly-owned
subsidiary of the Company in exchange for shares of our common
stock. These portfolios together consist of 16 senior living
facilities with 4,266 units, and an additional facility
with 233 units/beds, which is currently under contract for
sale. Also, one facility with 189 units/beds was sold on
July 1, 2005 for $2.5 million, the proceeds of which
were contributed to us in the series of formation transactions
described in "Business — History" and will
be managed by an affiliate of BLC. All of the preceding were
purchased in the second and third quarter of 2005 by affiliates
of Fortress.
As a result of these transactions we are the third largest
operator of senior living facilities in the United States.
37
Revenues
We generate all of our revenues from resident fees and
management fees. For the three months ended March 31, 2005
and the year ended December 31, 2004, approximately 99.5%
of our revenues were generated from resident fees and
approximately 0.5% were generated from management fees.
Resident Fees.
We generate resident fee revenue on
a monthly basis from each resident in each facility that we own
and operate or lease and operate. The rates we charge are highly
dependent on local market conditions and the competitive
environment in which the facilities operate. Substantially all
of our independent and assisted living residency agreements
allow for adjustments in the monthly fee payable thereunder not
less frequently than 12 or 13 months, or monthly,
respectively, thereby enabling us to seek increases in monthly
fees due to inflation, increased levels of care or other
factors. Any such pricing increase would be subject to market
and competitive conditions and could result in a decrease in
occupancy in the facilities. In addition, regulations governing
assisted living facilities in several states stipulate that each
resident must have the right to terminate the resident agreement
for any reason on reasonable notice. Consistent with these
regulations, a majority of our assisted living resident
agreements allow residents to terminate their agreements upon 0
to 30 days' notice. Our independent living facilities
generally allow residents to terminate their leases upon the
need for a higher level of care not provided at the facility or
death. Upon termination of a lease, the resident is usually
obligated to pay rent for the lesser of 60 days after he or
she vacates the unit or until the unit is rented by another
resident.
On average, for the three months ended March 31, 2005, we
generated resident fees of approximately $2,880 per unit/bed per
month, or $34,560 per unit/bed on an annual basis, and for the
three months ended March 31, 2004, we generated resident
fees of approximately $2,815 per unit/bed per month, or $33,780
per unit/bed on an annual basis. For the three months ended
March 31, 2005 and March 31, 2004, we generated
approximately $174.1 million and $154.6 million,
respectively, in resident fee revenue. For the years ended
December 31, 2004 and December 31, 2003, we generated
approximately $657.3 million and $217.2 million,
respectively, in resident fee revenue. The increases were
attributable to the inclusion of Alterra, effective
December 1, 2003, the leasing of 15 properties from
Ventas during the first half 2004, and improved operations at
our same store facilities.
In three of our CCRC facilities, independent living residents
pay an entrance fee upon moving into the facility in addition to
a monthly fee. We have two types of entrance fee arrangements,
as described below.
In two of our facilities, a portion of the fee is non-refundable
and a portion is refundable. The non-refundable portion of the
fee is initially recorded as deferred revenue and amortized to
revenue over the estimated stay of the resident in the facility.
The refundable portion of the fee is generally refundable upon
the resale of the unit, or in certain agreements upon resale of
a comparable unit or 12 months after the resident vacates
the unit. Amounts payable from resale of the unit or a
comparable unit are classified as long-term obligations since
they do not require a use of our working capital. Based on
market conditions and resident preferences we periodically
review our entrance fee arrangements to determine the amount of
the fee and the allocation between the refundable and
non-refundable portions.
In one facility the entrance fee is refundable to the resident
pro rata over a 67-month period. Accordingly, the fee is
amortized to revenue over 67 months. If the resident
vacates the unit, the refundable portion is classified as a
current liability.
We derive 98% of our resident fees from private pay sources. Our
resident fees are paid, on a monthly basis in advance, by
residents, their families, or other responsible parties,
typically out of personal income, assets or other savings. As a
result, economic downturns or changes in
38
demographics, among other things, could impact our ability to
charge and collect resident fees. Ancillary charges are billed
in arrears.
Management Fees.
Management fees are monthly fees
that we collect from owners of facilities for which we are the
manager. Management fees typically range from 2.8% to 5.0% of
the facility's total gross revenues. All management fees
are recognized as revenues when services are provided. For the
three months ended March 31, 2005 and March 31, 2004,
we earned approximately $0.9 million and $1.1 million,
respectively, in management fee revenue. For the years ended
December 31, 2004 and December 31, 2003, we earned
approximately $3.5 million and $5.4 million,
respectively, in management fee revenue. Management fee revenues
decreased primarily due to the lease of the 14 facilities from
Ventas during the quarter ended March 31, 2004, that were
previously managed by us, offset by the additional nine
facilities for which we took over management in August and
December 2004.
The terms of our management agreements generally range from one
to three years and can be cancelled by the property owners for
cause, sale of the facility or upon 30 to 60 days'
notice at renewal.
Operating Expenses
We classify our operating expenses into the following
categories: (i) facility operating expenses, which include
labor, food, marketing and other direct facility expenses,
insurance and real estate taxes; (ii) general and
administrative expenses, which primarily include the cost to
staff and maintain our corporate headquarters and other overhead
costs; (iii) facility lease payments; and
(iv) depreciation and amortization.
Alterra Reorganization
In the second half of 2000, two issues emerged that had a
materially adverse effect on Alterra's liquidity. First,
costs associated with operating Alterra's residences, labor
and liability insurance costs in particular, increased
significantly in the second half of 2000. Second, due both to a
generally unfavorable financing market for assisted living
residences and the declining credit fundamentals at both the
residence and corporate level, Alterra was unable to complete
its anticipated financing transactions in 2000 and 2001.
Throughout 2000 and 2001, Alterra sought to implement several
strategic initiatives designed to strengthen its balance sheet
and to enable management to focus on stabilizing and enhancing
its core business operations. The principal components of these
strategic initiatives included (i) discontinuing its
development activity; (ii) reducing its use of and reliance
upon joint venture arrangements; (iii) reducing the amount
of outstanding debt; and (iv) focusing on improving its
cash flow.
On January 22, 2003, Alterra filed a voluntary petition
with the Bankruptcy Court to reorganize under Chapter 11 of
the Bankruptcy Code. Alterra believed that its Chapter 11
Filing was an appropriate and necessary step to conclude its
reorganization initiatives commenced in 2001.
On November 26, 2003, the United States Bankruptcy Court
for the District of Delaware entered an order confirming
Alterra's Second Amended Plan of Reorganization, or the
Plan. Alterra executed an Agreement and Plan of Merger, or the
Merger Agreement, with FEBC-ALT Investors pursuant to which
FEBC-ALT Investors acquired 100% of the common stock of Alterra
upon emergence from the Chapter 11 bankruptcy proceeding.
Pursuant to the Merger Agreement, FEBC-ALT Investors was
capitalized with $76.0 million, including (i) a
$15.0 million senior loan to FEBC-ALT Investors from an
affiliate of Fortress Investment Trust II, or FIT II,
a private equity fund, and (ii) $61.0 million of
aggregate equity contributions. FIT II provided
approximately 75% of the equity investment to FEBC-ALT Investors
and was entitled to appoint a majority of the directors of
Alterra. Emeritus Corporation, or Emeritus and NW Select,
provided the remaining equity capital to FEBC-ALT Investors and
each was entitled to appoint one director. The merger
consideration was used to fund (i) costs of Alterra's
bankruptcy and reorganization and to provide for the working
capital and
39
other cash needs of Alterra and (ii) a distribution to the
unsecured creditors. In connection with the execution of the
Merger Agreement, Emeritus and FIT II delivered a Payment
Guaranty to Alterra pursuant to which Emeritus and FIT II
guaranteed up to $6.9 million and $69.1 million,
respectively, of the merger consideration.
Alterra emerged from bankruptcy on December 4, 2003, which
we refer to as the Effective Date.
Pursuant to the Merger Agreement, the maximum distribution to
holders of unsecured claims was approximately $23.0 million
(which includes payments pursuant to settlement agreements with
holders of deficiency claims), which was to be adjusted pursuant
to the Merger Agreement based on working capital and the cash
requirements of the Plan through the Effective Date. Alterra has
distributed all of the approximately $23.0 million. Certain
liabilities deemed subject to compromise were subsequently
repaid by Alterra, pursuant to the Plan.
The working capital settlement between Alterra and the committee
of unsecured creditors was finalized and approved by the
Bankruptcy Court on December 29, 2004, for a total fixed
distributable amount of $2.5 million. Through June 30,
2005, $1.0 million has been distributed. Payment of the
remaining distributable amount will be made when all unsecured
claims are determinable and liquidated, which is expected to
occur by the end of 2005.
On the Effective Date, Alterra adopted fresh start accounting
pursuant to the guidance provided by the American Institute of
Certified Public Accountant's Statement of Position
(SOP) 90-7,
Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code.
For financial
reporting purposes, Alterra adopted the provisions of fresh
start accounting effective December 1, 2003. In accordance
with the principles of fresh start accounting, Alterra adjusted
its assets and liabilities to their fair values as of
December 1, 2003. Alterra's reorganization value was
determined to be equal to the cash amount paid for all of the
outstanding common stock of post-bankruptcy Alterra plus the
post-emergence liabilities existing at the reorganization date
of December 4, 2003. To the extent the fair value of its
tangible and identifiable intangible assets, net of liabilities,
exceeded the reorganization value, the excess was recorded as a
reduction of the amount allocated to property, plant and
equipment and intangible assets.
Acquisitions and Dispositions
Our financial results are impacted by the timing, size and
number of acquisitions, leases and sale-leasebacks we complete
in a period. Since January 2001, the number of facilities we
owned or leased increased by 39, which resulted in an increase
of approximately 8,300 units/beds, for an aggregate
purchase price or lease value of approximately
$802.8 million (including two facilities held for sale, one
of which was sold on July 1, 2005 for $2.5 million).
During this time period, we managed an additional 13 facilities
with approximately 2,700 units/beds for a total of 52 facilities
with approximately 11,000 units/beds that we began to own, lease
or manage since January 2001.
During the fourth quarter of 2004, we completed a sale-leaseback
with Provident Senior Living Trust, or Provident, whereby we
sold 68 facilities (which included 6,819 units/beds) to
Provident for an aggregate sales price of $982.8 million
and leased the facilities back through October 31, 2019 and
December 31, 2019 with extension rights at our option. On
June 7, 2005, Ventas announced that it had completed the
acquisition of Provident pursuant to the terms of the Agreement
and Plan of Merger, dated as of April 12, 2005, under which
Provident was merged with and into a wholly-owned subsidiary of
Ventas.
During the first quarter of 2004, the limited partnerships that
owned 14 facilities in which our subsidiaries had general and
limited partnership interests sold these facilities to
affiliates of Ventas for an aggregate sales price of
$114.6 million. Ventas also acquired another facility from
a third party in a separate transaction. Simultaneously with
such sales, certain of our subsidiaries entered into
40
agreements to lease the 15 facilities (which included
2,215 units/beds) from Ventas pursuant to either a master
lease or individual leases (collectively, the Ventas Leases).
On May 1, 2002, we leased seven facilities, which included
1,477 units/beds, from an affiliate of Capstead Mortgage
Corporation, or Capstead, which at the time was an affiliate of
Fortress. In November 2002, Capstead sold one facility (which
contained 83 units/beds) and adjusted the lease payment.
Asset dispositions consist of assisted living facilities and
land parcels identified during Alterra's bankruptcy as
non-core assets that have been classified as held for sale. For
the years ended December 31, 2004 and 2003, Alterra
disposed of 13 facilities and land parcels that included
790 units/beds and nine facilities and land parcels that
included 551 units/beds, respectively.
Financial Developments
The following are certain changes in our financial results that
have occurred or that we expect to occur for the remainder of
2005 and beyond, as compared to our prior years' results.
On March 30, 2005, we refinanced the construction loans
secured by five facilities with new construction loans in the
aggregate amount of $182.0 million, bearing interest at
30-day LIBOR plus 3.05% to 5.60% (weighted average 3.50%),
payable in monthly installments of interest only through the
maturity of April 1, 2008. The loans can be extended for
two additional one-year terms (subject to certain performance
covenants and payment of an annual extension fee of .25%). See
"Description of Indebtedness — Guaranty Bank
Mortgage Loan."
In connection with the funding of the loans, we entered into
interest rate swaps with a notional amount of
$182.0 million to hedge the floating-rate debt payments,
for which we pay an average fixed rate of 4.64% and receive
30-day LIBOR from the counterparty. The interest rate swaps are
comprised of a $145.0 million notional amount for seven
years and a $37.0 million notional amount for three years.
In connection with the swaps we posted approximately
$2.3 million as collateral with the counterparty and are
required to post additional collateral based on changes in the
fair value of the swaps. The swaps are recorded as cash flow
hedges.
On March 28, 2005, we entered into a seven-year interest
rate swap with a notional amount of $70.0 million to hedge
$72.2 million of floating rate debt, pursuant to which we
pay a fixed rate of 4.70% and receive 30-day LIBOR from the
counterparty. The balance of the floating rate debt will be
hedged by a redesignation of the hedge of $2.2 million
currently in place with respect to debt secured by the Fortress
CCRC Portfolio.
We plan to repay $62.2 million and $2.2 million of
indebtedness and temporary lessor advances, respectively, with a
portion of the proceeds of this offering. Offsetting this amount
is $10.0 million of debt we expect to incur in connection
with the purchase of six facilities (which include
237 units/beds) pursuant to a purchase option in our lease
with Omega Healthcare Investors, Inc. and certain of its
affiliates. See "Use of Proceeds." The net effect of
these transactions will be to reduce our annual interest and
lease expense by $5.3 million.
As a new public company, we will incur significant legal,
accounting and other expenses that we did not incur as a private
company related to corporate governance, Securities and Exchange
Commission, or SEC, reporting requirements under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, and
compliance with the various provisions of the Sarbanes-Oxley Act
of 2002. In particular, we expect to incur significant
incremental expenses associated with Sarbanes-Oxley
Section 404 compliance documentation and remediation. In
addition, as a New York Stock Exchange-listed company, we are
required to establish an internal audit function, as a result of
which we will incur additional costs. We also expect these new
rules and regulations to make it more difficult and more
expensive for us to obtain director and officer liability
insurance, and we may be required to accept reduced coverage or
incur substantially higher costs to obtain coverage.
41
We are and will continue to be an acquisition-focused company.
As such, our financial results are impacted by our ability to
acquire existing senior living operating companies and
facilities. The primary factors affecting our determination of
the value of a facility for acquisition are its geographic
location, surrounding demographics, age and income of nearby
residents, occupancy, rental agreements, operating costs and
opportunities for improvements, financing alternatives
(including long-term and short-term financing) and leasing
alternatives. As we evaluate companies and/or facilities for
potential acquisition, we incur costs for various third
parties' assistance, including in connection with due
diligence, negotiation and structuring of these acquisitions. If
an acquisition is abandoned, these costs are expensed. If the
acquisition is consummated, these costs are capitalized as part
of the total purchase price.
Results of Operations
Comparison of the Three Months Ended March 31, 2005
to the Three Months Ended March 31, 2004
The following table sets forth, for the periods indicated,
statement of operations items and the amount and percentage of
increase or decrease of those items. The results of operations
for any particular period are not necessarily indicative of
results for any future period. The following data should be read
in conjunction with our combined financial statements and the
notes thereto, which are included herein ($ in 000's).
Increase
% Increase
2005
2004
(Decrease)
(Decrease)
Statement of Operations
    Data:
Revenue
Resident fees
$
174,112
$
154,583
$
19,529
12.6
%
Management fees
871
1,050
(179
)
(17.0
)%
Total revenues
174,983
155,633
19,350
12.4
%
Expenses
Facility operating
110,328
99,810
10,518
10.5
%
Lease expense
46,502
17,825
28,677
160.9
%
General and administrative
11,433
10,239
1,194
11.7
%
Depreciation and amortization
5,596
14,597
(9,001
)
(61.7
)%
Total operating expenses
173,859
142,471
31,388
22.0
%
Income from operations
1,124
13,162
(12,038
)
(91.5
)%
Interest income
362
224
138
61.6
%
Interest expense:
Debt
(8,899
)
(18,167
)
9,268
51.0
%
Change in fair value of derivatives
4,062
(2,832
)
6,894
N/A
Loss on extinguishment of debt
(453
)
—
(453
)
N/A
Equity in earnings (loss) of
    unconsolidated ventures, net of minority interests of $7 and
    $(6), respectively
(187
)
(373
)
186
49.9
%
Other
(246
)
(974
)
728
74.7
%
Loss before income taxes
(4,237
)
(8,960
)
4,723
52.7
%
(Provision) benefit for income taxes
(166
)
713
(879
)
(123.3
)%
Income (loss) before discontinued
    operations
(4,403
)
(8,247
)
3,844
46.6
%
Discontinued operations
(70
)
(820
)
750
91.5
%
Net loss
$
(4,473
)
$
(9,067
)
$
4,594
50.7
%
42
Increase
% Increase
2005
2004
(Decrease)
(Decrease)
Selected Operating and Other
    Data:
Number of facilities (at end of
    period)
366
359
7
1.9
%
Total units/beds operated(1)
26,109
24,423
1,686
6.9
%
Owned/leased facilities units/beds
22,541
22,318
223
1.0
%
Owned/leased facilities occupancy
    rate:
Period end
89.0
%
86.8
%
2.2
%
2.5
%
Weighted average
89.1
%
86.9
%
2.2
%
2.5
%
Managed facilities units/beds
3,568
2,105
1,463
69.5
%
Managed facilities period end
    occupancy rate(2)
82.3
%
86.0
%
(3.7
)%
(4.3
)%
Average monthly revenue per
    unit/bed(3)
$
2,880
$
2,815
$
65
2.3
%
(1)
Total units/beds operated represent the total units/beds
    operated as of the end of the period. Occupancy rate is
    calculated by dividing total occupied units/beds by total
    units/beds operated as of the end of the period.
(2)
Includes facilities managed by us but excludes Town Village
    Oklahoma City, which is currently in lease-up.
(3)
Average monthly revenue per unit/bed represents the average of
    the total monthly revenues divided by occupied units/beds at the
    end of the period averaged over the respective period presented
    and for the period of time in operation during the period for
    the same stores.
Revenues
Our total revenues increased primarily as a result of an
increase of $19.5 million, or 12.6%, in resident fees, as
partially offset by a decrease in management fee revenue of
$0.2 million, or 17.0%.
Resident fee revenue.
Resident fees increased by
approximately $6.0 million, or 4.1%, at the 328 facilities
we operated during both periods. The remaining increase in
resident fee revenue was primarily due to the lease up of five
facilities and a full three months of operations from the 14
facilities leased during the three months ended March 31,
2005, pursuant to our lease agreements with Ventas.
Management fee revenue.
Management fee revenue
decreased over this period primarily due to the lease of the 14
facilities from Ventas during the quarter ended March 31,
2004, that were previously managed by us, offset by nine new
management agreements entered into during the second half of
2004.
Operating Expenses
The increase in total operating expenses was attributable to the
following: (i) facility operating expenses increased
$10.5 million, or 10.5%; (ii) general and
administrative expenses increased $1.2 million, or 11.7%;
and (iii) lease expenses increased $28.7 million, or
160.9%; which increases were offset by a decrease in
depreciation and amortization expenses of $9.0 million, or
61.7%.
Explanations of significant variances noted in individual
line-item expenses for the three months ended March 31,
2005 as compared to the three months ended March 31, 2004
are as follows:
•
Of our increased facility operating expenses, $2.4 million,
    or 2.5%, was attributable to the 328 facilities we operated
    during both periods. The increase was primarily due to increases
    in salaries, wages and benefits and a full three months of
    operations from the 14 facilities that we leased from Ventas
    during the quarter ended March 31, 2004.
•
General and administrative expenses increased $1.2 million,
    or 11.7%, primarily as a result of an increase in salaries,
    wages and benefits, and an increase in the number of employees
    in anticipation of the acquisition of the Fortress CCRC
    Portfolio and Prudential Portfolio that were acquired in the
    second and third quarter of 2005. General and administrative
    expenses as a percentage of total revenue, including revenue
    generated by the facilities we manage,
43
was 5.9% and 6.1% for the three months ended March 31, 2005
    and 2004, respectively, calculated as follows:
Three Months Ended
March 31,
2005
2004
Combined resident fee revenues
$
174,112
$
154,583
Resident fee revenues under
    management
19,734
12,666
Total
$
193,846
$
167,249
General and administrative expenses
$
11,433
$
10,239
General and administrative expenses
    as of % of total revenues
5.9
%
6.1
%
•
Lease expenses increased $28.7 million, or 160.9%,
    primarily due to a full quarter of lease payments under the
    Ventas operating leases that we entered into during the first
    half of 2004 and the Provident leases that we entered into
    during the fourth quarter of 2004, including $6.1 million
    of additional lease expense from straight-line rent expense,
    partially offset by $2.3 million of deferred gain
    amortization.
•
Total depreciation and amortization expense decreased by
    $9.0 million, or 61.7%, primarily due to sale-leaseback
    arrangements entered into with respect to the 68 facilities sold
    and leased back from Provident in the fourth quarter of 2004,
    partially offset by increased depreciation on capital
    expenditures and leasehold improvements.
•
Interest income increased $0.1 million, or 61.6%, primarily
    due to an increase in cash and cash equivalents invested from
    the Provident transaction proceeds.
•
Interest expense decreased $16.2 million, or 77.0%,
    primarily due to approximately $433.6 million of our debt
    that was assumed by Provident or repaid using proceeds from the
    sale-leaseback arrangements in the fourth quarter of 2004,
    offset by an increase related to the change in fair value of
    interest rate swaps and increased interest rates on
    floating-rate debt.
44
Comparison of Year Ended December 31, 2004 to Year
Ended December 31, 2003
The following table sets forth, for the periods indicated,
statement of operations items and the amount and percentage of
increase or decrease of these items. The results of operations
for any particular period are not necessarily indicative of
results for any future period. The following data should be read
in conjunction with our combined financial statements and the
notes thereto, which are included herein ($ in 000's). Our
results reflect the inclusion of Alterra in our operations
effective December 1, 2003.
Increase
% Increase
2004
2003
(Decrease)
(Decrease)
Statement of Operations
    Data:
Revenue
Resident fees
$
657,327
$
217,216
$
440,111
202.6
%
Management fees
3,545
5,368
(1,823
)
(34.0
)%
Total revenues
660,872
222,584
438,288
196.9
%
Expenses
Facility operating
415,169
133,119
282,050
211.9
%
Lease expense
99,997
30,744
69,253
225.3
%
General and administrative
43,640
15,997
27,643
172.8
%
Depreciation and amortization
52,307
22,480
29,827
132.7
%
Total operating expenses
611,113
202,340
408,773
202.0
%
Income from operations
49,759
20,244
29,515
145.8
%
Interest income
637
14,037
(13,400
)
(95.5
)%
Interest expense:
Debt
(63,634
)
(25,106
)
(38,528
)
(153.5
)%
Change in fair value of derivatives
3,176
—
3,176
N/A
Loss from sale of properties
—
(24,513
)
24,513
100.0
%
Gain on extinguishment of debt
1,051
12,511
(11,460
)
(91.6
)%
Equity in earnings (loss) of
    unconsolidated ventures, net of minority interests
(931
)
318
(1,249
)
(392.8
)%
Other
(114
)
—
(114
)
N/A
Loss before income taxes
(10,056
)
(2,509
)
(7,547
)
(300.8
)%
(Provision) benefit for income taxes
(11,111
)
(139
)
(10,972
)
(7,893.5
)%
Income (loss) before discontinued
    operations and cumulative effect of a change in accounting
    principle
(21,167
)
(2,648
)
(18,519
)
(699.4
)%
Discontinued operations
(722
)
(643
)
(79
)
(12.3
)%
Cumulative effect of change in
    accounting principle, net of tax of $8,095 in 2003
—
(13,208
)
13,208
100.0
%
Net loss
$
(21,889
)
$
(16,499
)
$
(5,390
)
(32.7
)%
Selected Operating and Other
    Data:
Number of facilities (at end of
    period)
367
359
8
2.2
%
Total units/beds operated(1)
26,108
24,423
1,685
6.9
%
Owned/leased facilities units/beds
22,540
20,324
2,216
10.9
%
Owned/leased facilities occupancy
    rate:
Period end
89.4
%
87.5
%
1.9
%
2.2
%
Weighted average
87.4
%
88.0
%
(0.6
)%
(0.7
)%
Managed facilities units/beds
3,568
4,099
(531
)
(12.9
)%
Managed facilities period end
    occupancy rate(2)
83.2
%
89.2
%
(6.0
)%
(6.7
)%
Average monthly revenue per
    unit/bed(3)
$
2,827
$
2,660
$
167
6.3
%
(1)
Total units/beds operated represent the total units/beds
    operated as of the end of the period. Occupancy rate is
    calculated by dividing total occupied units/beds by total
    units/beds operated as of the end of the period.
(2)
Includes facilities managed by us but excludes Town Village
    Oklahoma City, which is currently under development.
(3)
Average monthly revenue per unit/bed represents the average of
    the total monthly revenues divided by occupied units/beds at the
    end of the period averaged over the respective period presented
    and for the period of time in operation during the period for
    the same stores.
45
Revenues
Total revenues increased primarily due to increased resident
fees of $440.1 million, or 202.6%, the inclusion of Alterra
into our operations for a full year following the Effective Date
in December 2003, leasing of the 15 Ventas facilities in the
first half of 2004 (14 of which were leased in the three months
ended March 31, 2004 and one of which was leased on
May 13, 2004), partially offset by a decrease in management
fee revenue of $1.8 million, or 34.0%.
Resident fee revenue.
Resident fees increased by
$11.6 million, or 6.5%, at the 29 facilities we operated
during both periods. The remaining increase was primarily due to
the addition of Alterra into our operations for a full year
following the Effective Date, the consolidation of the five
facilities developed and managed by us pursuant to revised
Interpretation No. 46,
Consolidation of Variable
Interest Entities
, an interpretation of ARB No. 51
("FIN 46R") and an increase in resident fees
resulting from the 15 facilities leased from Ventas in the first
half of 2004.
Management fee revenue.
Management fee revenue
decreased over this period primarily due to the 14 properties
leased from Ventas that were previously managed by us, partially
offset by the additional nine facilities (which include
1,915 units/beds) for which we took over management in
August and December 2004, and consolidation of five facilities
developed and managed by us pursuant to FIN 46R at
December 31, 2003.
Operating Expenses
The increase in total operating expenses was attributable to the
following: (i) facility operating expenses increased
$282.1 million, or 211.9%; (ii) general and
administrative expenses increased $27.6 million, or 172.8%;
(iii) lease expenses increased $69.3 million, or
225.3%; and (iv) depreciation and amortization expenses
increased $29.8 million, or 132.7%.
Explanations of significant variances noted in individual
line-item expenses for the year ended December 31, 2004 as
compared to the year ended December 31, 2003 are as follows:
•
Of our increased facility operating expenses, $4.6 million,
    or 4.4%, was attributable to the 29 facilities we operated
    during both periods. The remaining increase was primarily a
    result of the inclusion of Alterra into our operations for a
    full year following the Effective Date in December 2003, the
    consolidation of the five facilities pursuant to FIN 46R
    developed and managed by us and expenses associated with
    operating an additional 15 facilities leased from Ventas in the
    first half of 2004.
•
General and administrative expenses increased
    $27.6 million, or 172.8%, primarily as a result of the
    inclusion of Alterra into our operations for a full year
    following the Effective Date in December 2003, and an increase
    in salaries, wages and number of personnel (due to wage and
    salary increases and an additional nine properties we managed
    during the second half of 2004). General and administrative
    expense as a percentage of total revenue, including revenue
    generated by the facilities we manage was 6.0% and 4.9% for the
    years ended December 31, 2004 and 2003, respectively,
    calculated as follows ($ in 000's):
Year Ended
December 31,
2004
2003
Combined resident fee revenues
$
657,327
$
217,216
Resident fee revenues under
    management
64,191
108,320
Total
$
721,518
$
325,536
General and administrative expenses
$
43,640
$
15,997
General and administrative expenses
    as of % of total revenues
6.0
%
4.9
%
46
•
Lease expense increased $69.3 million, or 225.3%, primarily
    due to lease expense associated with a full year's
    operation of Alterra following the Effective Date in December
    2003, the addition of 15 operating leases executed during the
    first half of 2004 for the Ventas facilities, and the addition
    of 68 operating leases executed during the fourth quarter 2004
    for the Provident facilities, including $3.5 million of
    additional straight-line rent expense, partially offset by
    $1.7 million of additional deferred gain amortization.
•
Total depreciation and amortization expense increased by
    $29.8 million, or 132.7%, primarily due to depreciation and
    amortization on Alterra's owned facilities, taking into
    account a full year's operation of Alterra following the
    Effective Date in December 2003, capital additions (including
    capital additions from 15 additional facilities leased from
    Ventas in 2004); the purchase of 15 facilities previously leased
    by us and the consolidation of five facilities pursuant to
    FIN 46R developed and managed by us at December 31,
    2003.
•
Interest income decreased $13.4 million, or 95.5%,
    primarily due to the reduction in lease security deposits
    resulting from the purchase of 15 facilities in 2003 and one
    facility in 2002 that were previously leased by us.
•
Interest expense increased $35.4 million, or 140.8%,
    primarily due to the cost of servicing Alterra's debt
    obligations for a full year following the Effective Date in
    December 2003, five facilities consolidated at December 31,
    2003, pursuant to FIN 46R, and interest expense from 15
    facilities purchased in 2003 and one facility purchased in 2002
    that were previously leased by us. This increase was partially
    offset by a $3.2 million decrease in the fair value
    liability of the interest rate swaps from December 31, 2003
    to December 31, 2004.
47
Comparison of Year Ended December 31, 2003 to Year
Ended December 31, 2002
The following table sets forth, for the periods indicated,
statement of operations items and the amount and percentage of
increase or decrease of such item. The results of operations for
any particular period are not necessarily indicative of results
for any future period. The following data should be read in
conjunction with our combined financial statements and the notes
thereto, which are included herein ($ in 000's). Our
results reflect the inclusion of Alterra in our operations,
effective December 1, 2003.
Increase
% Increase
2003
2002
(Decrease)
(Decrease)
Statement of Operations
    Data:
Revenue
Resident fees
$
217,216
$
156,894
$
60,322
38.4
%
Management fees
5,368
4,622
746
16.1
%
Total revenues
222,584
161,516
61,068
37.8
%
Expenses
Facility operating
133,119
92,980
40,139
43.2
%
Lease expense
30,744
31,003
(259
)
(0.8
)%
General and administrative
15,997
12,540
3,457
27.6
%
Depreciation and amortization
22,480
13,708
8,772
64.0
%
Total operating expenses
202,340
150,231
52,109
34.7
%
Income from operations
20,244
11,285
8,959
79.4
%
Interest income
14,037
18,004
(3,967
)
(22.0
)%
Interest expense — debt
(25,106
)
(9,490
)
(15,616
)
(164.6
)%
Loss from sale of properties
(24,513
)
—
(24,513
)
N/A
Gain on extinguishment of debt
12,511
—
12,511
N/A
Equity in earnings (loss) of
    unconsolidated ventures, net of minority interests
318
584
(266
)
(45.5
)%
Loss before income taxes
(2,509
)
20,383
(22,892
)
(112.3
)%
(Provision) benefit for income taxes
(139
)
(8,666
)
8,527
N/A
Income (loss) before discontinued
    operations and cumulative effect of a change in accounting
    principle
(2,648
)
11,717
(14,365
)
(122.6
)%
Discontinued operations
(643
)
—
(643
)
N/A
Cumulative effect of change in
    accounting principle, net of tax of $8,095 in 2003
(13,208
)
—
(13,208
)
N/A
Net income (loss)
$
(16,499
)
$
11,717
$
(28,216
)
(240.8
)%
Selected Operating and Other
    Data:
Number of facilities (at end of
    period)
359
60
299
498.3
%
Total units/beds operated(1)
24,423
11,334
13,089
115.5
%
Owned/leased facilities units/beds
20,324
6,591
13,733
208.4
%
Owned/leased facilities occupancy
    rate:
Period end
87.5
%
91.0
%
(3.5
)%
(3.8
)%
Weighted average
88.0
%
90.0
%
(2.0
)%
(2.2
)%
Managed facilities units/beds(2)
4,099
4,743
(644
)
(13.6
)%
Managed facilities period end
    occupancy rate(2)
89.2
%
79.8
%
9.4
%
11.8
%
Average monthly revenue per
    unit/bed(3)
$
2,660
$
2,516
$
144
5.4
%
(1)
Total units/beds operated represent the total units/beds
    operated as of the end of the period. Occupancy rate is
    calculated by dividing total occupied units/beds by total
    units/beds operated as of the end of the period.
(2)
Includes facilities managed by us but excludes Town Village
    Oklahoma City, which is currently under development.
(3)
Average monthly revenue per unit/bed represents the average of
    the total monthly revenues divided by occupied units/beds at the
    end of the period averaged over the respective period presented
    and for the period of time in operation during the period for
    the same stores.
48
Revenues
Our total revenues increased primarily due to increased resident
fees of $60.3 million, or 38.4%, the inclusion of Alterra
into our operations effective December 1, 2003, the leasing
of the Chambrel portfolio as of May 1, 2002, the purchase
of three facilities in November 2002 that were previously
managed by us and an increase in management fee revenue of
$0.7 million, or 16.1% (due to increased revenues from
facilities developed and managed by us and an additional eight
Grand Court facilities managed by us).
Resident fee revenue.
Resident fees increased by
$2.3 million, or 1.9%, at the 21 facilities we operated
during both periods. The remaining increase in resident fee
revenue was primarily due to the inclusion of Alterra into our
operations following the Effective Date (December 2003), to the
leasing of the Chambrel portfolio as of May 1, 2002 and the
purchase of three facilities in November 2002 that were
previously managed by us.
Management fee revenue.
Increased management fee
revenues were primarily due to increased revenues from
facilities developed and managed by us and an additional eight
Grand Court facilities managed by us, partially offset by the
three facilities purchased in November 2002.
Operating Expenses
The increase in total operating expenses was attributable to the
following: (i) facility operating expenses increased
$40.1 million, or 43.2%; (ii) general and
administrative expenses increased $3.5 million, or 27.6%;
(iii) lease expense decreased $0.3 million, or 0.8%;
and (iv) depreciation and amortization increased
$8.8 million, or 64.0%.
Explanations of significant variances noted in individual
line-item expenses for the year ended December 31, 2003 as
compared to the year ended December 31, 2002 are as follows:
•
Of our increased facility operating expenses, $2.1 million,
    or 3.0%, was attributable to the 21 facilities we operated
    during both periods. The remaining increase was primarily due to
    the inclusion of Alterra into our operations following the
    Effective Date, the leasing of the Chambrel portfolio effective
    May 1, 2002 and the purchase of the three facilities in
    November 2002.
•
General and administrative expenses increased $3.5 million,
    or 27.6%, primarily due to the inclusion of Alterra into our
    operations following the Effective Date and an increase in
    salaries, wages and number of personnel, due to the leasing of
    the Chambrel portfolio and an additional 12 facilities managed
    by us. General and administrative expenses as a percentage of
    total revenue, including those generated by the facilities we
    manage, was 4.9% and 5.2% for the years ended December 31,
    2003 and 2002, respectively, calculated as follows ($in
    000's):
Year Ended
December 31,
2003
2002
Combined resident fee revenues
$
217,216
$
156,894
Resident fee revenues under
    management
108,320
83,206
Total
$
325,536
$
240,100
General and administrative expenses
$
15,997
$
12,540
General and administrative expenses
    as of % of total revenues
4.9
%
5.2
%
•
Lease expenses decreased $0.3 million, or 0.8%, primarily
    due the purchase of 14 facilities and one facility in 2003 and
    2002, respectively, that were previously leased by us, offset by
    the inclusion of Alterra into our operations following the
    Effective Date in December 2003 and
49
the leasing of the Chambrel portfolio effective May 1,
    2002, including $2.7 million of reduced straight-line rent
    expense and an additional $0.3 million of deferred gain
    amortization.
•
Total depreciation and amortization expenses increased by
    $8.8 million, or 64.0%, primarily due to the purchase of 14
    facilities and one facility in 2003 and 2002, respectively, that
    were previously leased by us and the inclusion of Alterra into
    our operations following the Effective Date in December 2003.
•
Interest income decreased $4.0 million, or 22.0%, primarily
    due to the reduction in lease security deposits resulting from
    the purchase of 14 facilities and one facility in 2003 and 2002,
    respectively, that were previously leased by us.
•
Interest expense increased $15.6 million, or 164.6%,
    primarily due to the financing of the purchase of 14 facilities
    and one facility in 2003 and 2002, respectively, that were
    previously leased by us and the purchase of three facilities in
    November 2002 that were previously managed by us.
Liquidity and Capital Resources
Our liquidity requirements have historically arisen from, and we
expect they will continue to arise from, working capital,
general and administrative costs, debt service and lease
payments, acquisition costs, employee compensation and related
benefits, capital improvements and dividend payments. In the
past we have met our cash requirements for operations using cash
flows from operating revenues, the receipt of resident fees and
the receipt of management fees from third-party-managed
facilities. In addition to using cash flows from operating
revenues, we use available funds from our indebtedness and
long-term leasing of our facilities to meet our cash
obligations. Over 98% of our resident fee revenues are generated
from private pay residents with less than 2% of our resident fee
revenues coming from reimbursement programs such as Medicare and
Medicaid. The primary use of our cash is for operating costs,
which includes debt service and lease payments and capital
expenditures. We expect to meet our cash requirements for the
next 12 months from these sources as well as from cash
generated from this offering and the credit facility we expect
to enter into, as discussed below in "— New
Credit Facility."
We expect to fund the growth of our business through cash flows
from operations and cash flows from financing activities, such
as this offering, and through the incurrence of additional
indebtedness or leasing arrangements. We expect to assess our
financing alternatives periodically and access the capital
markets opportunistically. If our existing resources are
insufficient to satisfy our liquidity requirements, or if we
enter into an acquisition or strategic arrangement with another
company, we may need to sell additional equity or debt
securities. Any such sale of additional equity securities will
dilute the interests of our existing stockholders, and we cannot
be certain that additional public or private financing will be
available in amounts or on terms acceptable to us, if at all. If
we are unable to obtain this additional financing, we may be
required to delay, reduce the scope of, or eliminate one or more
aspects of our business development activities, which could harm
the growth of our business. Upon consummation of this offering
and the application of the net proceeds, we expect to have
approximately
$           million
in cash and cash equivalents. We may incur additional
indebtedness or lease financing to fund such acquisitions. In
addition, we may incur additional indebtedness or lease
financing to fund future dividends.
Our actual liquidity and capital funding requirements depend on
numerous factors, including our operating results, our ability
to acquire new facilities, general economic conditions and the
cost of capital.
Cash Flows
We had cash and cash equivalents of $76.1 million,
39.3 million, $86.9 million and $56.5 million at
March 31, 2005, March 31, 2004, December 31, 2004
and December 31, 2003, respectively.
50
These amounts exclude cash and investments-restricted and lease
security deposits totaling $69.4 million,
$36.8 million, $74.2 million and $61.6 million,
respectively, escrowed pursuant to the terms of our
indebtedness, leases, residency agreements and insurance
programs. Restricted cash amounts are generally available to pay
real estate taxes and insurance premiums, reimbursements of
capital improvements and refundable tenant security deposits,
and to collateralize our debt, lease and self-insured retention
obligations.
The increase in cash and cash equivalents at March 31, 2005
as compared to March 31, 2004 was primarily due to the
following:
•
Net cash (used in) provided by operating activities for the
    three months ended March 31, 2005 totaled approximately
    ($4.4 million), compared to approximately $5.6 million
    for the three months ended March 31, 2004, primarily due to
    increased facility lease expense related to the Provident
    sale-leaseback that occurred in the fourth quarter of 2004 and
    payment of accrued expenses during 2004, partially offset by
    reduced interest expense for the properties related to the
    Provident sale-leaseback;
•
Net cash (used in) provided by investing activities for the
    three months ended March 31, 2005 totaled approximately
    ($1.8 million) million, compared to approximately
    $23.0 million for the three months ended March 31,
    2004, primarily due to the sale of the Grand Court
    partnerships' facilities, the proceeds of which were used
    to repay loans and amounts due from the partnerships and to pay
    distributions to the general and limited partners (of which we
    owned interests through our investment in GFB-AS Investors,
    LLC), and the release of cash from cash and
    investments-restricted; and
•
Net cash used in financing activities for the three months ended
    March 31, 2005 totaled approximately $4.6 million,
    compared to approximately $45.7 million for the three
    months ended March 31, 2004, primarily due to repayment of
    outstanding indebtedness related to the sale of properties in
    the first quarter of 2004, offset by proceeds of debt we
    obtained in the first quarter of 2005.
The increase in cash and cash equivalents at December 31,
2004 from December 31, 2003 was primarily due to the
following:
•
Net cash provided by operating activities for the year ended
    December 31, 2004 totaled approximately $50.1 million,
    compared to approximately $34.1 million for the year ended
    December 31, 2003, primarily due to the inclusion of
    Alterra into our operations following the Effective Date in
    December 2003 and improved operations and partially offset by
    the consolidation of five facilities pursuant to FIN 46R,
    effective December 31, 2003, that were still in lease up
    and generating operating deficits;
•
Net cash provided by investing activities for the year ended
    December 31, 2004 totaled approximately
    $524.7 million, compared to approximately
    $105.9 million for the year ended December 31, 2003,
    primarily due to the receipt of proceeds from the Provident
    sale-leaseback transaction, partially offset by the inclusion of
    Alterra effective December 1, 2003; and
•
Net cash used in financing activities for the year ended
    December 31, 2004 totaled approximately
    $544.5 million, compared to approximately
    $85.7 million for the year ended December 31, 2003,
    primarily due to payment of a dividend of $304.6 million to
    our stockholders, of which $254.6 million was paid in
    connection with the Provident sale-leaseback in the fourth
    quarter 2004, and the repayment of approximately
    $312.4 million of outstanding indebtedness.
51
The increase in cash and cash equivalents at December 31,
2003 from December 31, 2002 was primarily due to the
following:
•
Net cash provided by operating activities for the year ended
    December 31, 2003 totaled approximately $34.1 million,
    compared to approximately $39.6 million for the year ended
    December 31, 2002, primarily due to the inclusion of
    Alterra into our operations following the Effective Date in
    December 2003, the purchase of three facilities in November 2002
    that were previously managed by us and were still in lease up
    and generating operating deficits and additional interest
    expense related to stockholder loans;
•
Net cash provided by (used in) investing activities for the year
    ended December 31, 2003 totaled approximately
    $105.9 million, compared to approximately
    ($47.3 million) for the year ended December 31, 2002,
    primarily due to the receipt of proceeds from the sale of
    properties and additional receipts from cash and
    investments-restricted during 2003;
•
Net cash (used in) provided by financing activities for the year
    ended December 31, 2003 totaled approximately
    ($85.7 million), compared to approximately
    $8.7 million for the year ended December 31, 2002, due
    to formation of our joint venture with Northwestern Mutual Life
    Insurance Co., or Northwestern, and repayment of outstanding
    indebtedness from the sale of two of the facilities to the joint
    venture and refinancing of the third facility during 2003.
New Credit Facility
Prior to the closing of this offering, we intend to enter into a
short-term revolving credit facility that will provide
borrowings of up to $100.0 million; however, there can be
no assurance that we will be able to obtain the credit facility
or on the terms described herein. The revolving credit facility
is expected to bear interest at the prime rate plus 1.00%. Net
proceeds from the borrowings under our revolving credit facility
are expected to be used to fund acquisitions.
We expect our new credit facility will contain various financial
covenants requiring us to maintain certain financial ratios.
Specifically, our new credit facility is expected to contain
financial covenants requiring us to maintain certain cash flow
requirements. In addition, the credit facility is expected to
contain various customary restrictive covenants that may limit
our and our subsidiaries' ability to, among other things,
pay dividends and incur additional indebtedness.
Contractual Commitments
The following table presents a summary of our material
indebtedness, including the related interest payments, lease and
other contractual commitments, as of December 31, 2004.
There were no material changes to our obligations at
March 31, 2005 as compared to December 31, 2004, other
than the refinancing of the five facilities described in
"— Company Indebtedness, Long-Term Leases and
Hedging Agreements." In addition, in connection with the
acquisition of the Fortress CCRC Portfolio and the Prudential
Portfolio we incurred an additional $276.8 million
aggregate amount of indebtedness.
Total
2005
2006
2007
2008
2009
Thereafter
($ in 000s)
Contractual Obligations:
Long-term debt(1)
$
371,037
$
3,888
$
3,320
$
3,437
$
193,087
$
83,915
$
83,390
Capital lease obligations(1)
107,614
7,944
7,944
7,944
7,944
7,944
67,894
Operating lease obligations(2)
2,904,284
169,255
173,952
178,088
180,703
183,763
2,018,523
Purchase obligations(3)
2,546
1,108
956
438
44
—
—
Total
$
3,385,481
$
182,195
$
186,172
$
189,907
$
381,778
$
275,622
$
2,169,807
52
(1)
Includes contractual interest for all fixed-rate obligations and
    assumes interest on variable rate instruments at the
    December 31, 2004 rate.
(2)
Reflects future cash payments after giving effect to lease
    escalators and assumes payments on variable rate instruments at
    the December 31, 2004 rate.
(3)
Represents minimum purchase commitments pursuant to contracts
    with suppliers.
Company Indebtedness, Long-term Leases and Hedging
Agreements
Indebtedness
As of March 31, 2005, December 31, 2004 and
December 31, 2003, our outstanding property-specific debt
was approximately $383.3 million, $371.0 million and
$1,029.3 million, respectively. The decrease from
December 31, 2003 to December 31, 2004, was primarily
due to the assumption by Provident of approximately
$483.3 million of indebtedness, including first mortgage
loans, mezzanine loans and an unsecured line of credit, in
connection with the Provident sale-leaseback and net repayment
of approximately $232.5 million of indebtedness, including
$19.4 million of loans to the stockholders of Fortress
Brookdale Acquisition LLC. The increase from December 31,
2004 to March 31, 2005, was primarily due to our incurring
$10.0 million of indebtedness in connection with swap
termination payments, and the refinancing of our
$182.0 million Guaranty Bank loan, partially offset by
scheduled principal payments.
We have unsecured lines of credit of $28.6 million at
March 31, 2005, of which $8.6 million is restricted
for certain letters of credit and bears interest at the prime
rate plus 1.00%. Of the balance, $10.0 million was used to
pay a portion of our swap termination payment (and is expected
to be repaid from a portion of the offering proceeds) and
$7.4 million and $0.7 million is in the form of
outstanding letters of credit for a security deposit under
leases with Ventas and self-insured retention risk,
respectively, leaving an available balance of $1.9 million.
As of December 31, 2004, we had no outstanding borrowings
(excluding letters of credit) on our unsecured line of credit,
as compared to $15.4 million outstanding, excluding letters
of credit, as of December 31, 2003. As of December 31,
2004, our unsecured line of credit was $18.6 million (as
compared to $41.6 million as of December 31, 2003), of
which $8.6 million is restricted for certain letters of
credit and bears interest at the prime rate plus 1.00%, with a
maturity date of May 31, 2006. The reduction in the
available unsecured line of credit was due to our reduced
borrowing needs as a result of increased cash flow from
operations and cash and cash equivalents as a result of the
Provident transaction.
On March 30, 2005, we refinanced the construction loans secured
by five facilities with new construction loans in the aggregate
amount of $182.0 million, bearing interest at 30-day LIBOR
plus 3.05% to 5.60% (with a weighted average of 3.50%), payable
in monthly installments of interest only through the maturity of
April 1, 2008. The loans can be extended for two additional
one-year terms (subject to certain performance covenants and
payment of an annual extension fee of 0.25% of the amount
outstanding). See "Description of Indebtedness —
Guaranty Bank Mortgage Loan."
We have secured our self-insured retention risk under our
workers' compensation and general liability and
professional liability programs and our lease security deposits
with $17.1 million and $33.9 million, respectively, of
cash and letters of credit at March 31, 2005.
Long-term Leases
We have historically financed our acquisitions and current
portfolio with a combination of mortgage financing and long-term
leases and we intend to continue to use these types of
financings in the future. During 2004, we entered into two
long-term leases with Ventas and Provident. In connection with
the entry leases, we substantially reduced our outstanding debt
during 2004 by $483.3 million.
53
As of December 31, 2004, we have 307 facilities under long-term
leases. Our lessors have invested a total of
$1,874.4 million in the facilities we lease from them. The
leased facilities are generally fixed rate leases with annual
escalators that are either fixed or tied to the consumer price
index.
We have the following two leases with a floating-rate debt
component built into the lease payment:
First, a component of the Chambrel portfolio lease payment is a
pass through of debt service, which includes $100.8 million of
floating rate tax-exempt debt, and is credit enhanced by Fannie
Mae and subject to interest rate caps at 6.0%.
Second, the Provident lease contains $110.4 million of variable
rate mortgages, which includes $80.0 million of floating-rate
tax-exempt debt, which are credit enhanced by Freddie Mac. The
payments under the lease are subject to interest rate caps with
a weighted-average rate of 6.39%. The balance of $30.4 million
is unhedged; however, we intend to repay a portion of our
currently hedged floating-rate debt with the proceeds of this
offering and redesignate the hedge to the floating-rate lease
payment. See "Use of Proceeds."
For the year ended December 31, 2004, our minimum annual lease
payments for our capital and financing leases and operating
leases was $7.9 million and $169.3 million, respectively. This
amount excludes the straight-line rent expense associated with
our annual escalators and the amortization of the deferred gains
recognized in connection with the sale-leasebacks.
Hedging
As of December 31, 2004, we had one interest rate swap
agreement that converted a $37.3 million notional value of
our floating-rate construction debt to a fixed-rate basis of
5.19% through maturity on April 1, 2005. The market value
of the swap at December 31, 2004 and December 31, 2003
was a liability of approximately $0.3 million and
approximately $1.5 million, respectively, which is included
in other current liabilities.
We had four ten-year forward interest rate swaps to fix
$97.3 million of future mortgage debt with an interest rate
of 7.03%, at 7.325%, with maturity dates ranging from August
2012 to March 2013. In May 2004, we extended the termination
dates of these swaps to June 2006 (as discussed below). The
terms of the forward interest rate swaps require us to pay a
fixed-interest rate to the counterparties and to receive 90-day
LIBOR from the counterparty. The market value of the forward
interest rate swaps at December 31, 2004 and
December 31, 2003 was a liability of $17.9 million and
$19.9 million, respectively. Included in cash and
investments-restricted at December 31, 2004 and
December 31, 2003 are deposits of $8.0 million and
$6.6 million, respectively, to collateralize our forward
interest rate swap obligations.
On March 30, 2005, we terminated the four ten-year forward
interest rate swaps and incurred a termination payment of
approximately $15.8 million, including accrued interest,
which was funded from $5.8 million of cash and
investments-restricted and a $10.0 million unsecured loan
from La Salle Bank, N.A. The $10.0 million unsecured
loan bears interest payable monthly at the prime rate plus
1.00%, and the principal is payable in quarterly installments of
$0.5 million commencing July 1, 2005 and maturing
March 31, 2007. Pursuant to the loan agreement, the loan is
required to be repaid upon the earlier of the maturity date or
the completion of an initial public offering. We plan to repay
the balance of this loan with a portion of the proceeds of this
offering. See "Use of Proceeds."
We had interest rate caps with notional amounts of approximately
$62.3 million and approximately $15.0 million and
strike prices of 6.35% and 6.58% that expired at June 1,
2009 and December 1, 2004, respectively. The interest rate
caps were assigned to Provident in October 2004. Pursuant to the
terms of our lease with Provident, the floating rate adjustment
we are required to pay is limited to the rate under the assumed
interest rate caps.
54
In connection with the funding of the loans from Guaranty Bank,
we entered into interest rate swaps with a notional amount of
$182.0 million to hedge the floating rate debt and lease
payments where we pay an average fixed rate of 4.64% and receive
30-day LIBOR from the counterparty. The interest rate swaps are
comprised of a $145.0 million notional amount for seven
years and a $37.0 million notional amount for three years.
In connection with the swaps, we posted approximately
$2.3 million as cash collateral with the counterparty and
are required to post additional cash collateral based on changes
in the fair value of the swaps. The swaps are recorded as cash
flow hedges.
Impacts of Inflation
Resident fees for the facilities we own or lease and management
fees from facilities we manage for third parties are our primary
source of revenue. These revenues are affected by the amount of
monthly resident fee rates and facility occupancy rates. The
rates charged are highly dependent on local market conditions
and the competitive environment in which our facilities operate.
Substantially all of our independent and assisted living
residency agreements allow for adjustments in the monthly fee
payable thereunder not less frequently than 12 or
13 months, or monthly, respectively, thereby enabling us to
seek increases in monthly fees due to inflation, increased
levels of care or other factors. Any pricing increase would be
subject to market and competitive conditions and could result in
a decrease in occupancy in the facilities. We believe, however,
that our ability to periodically adjust the monthly fee serves
to reduce the adverse affect of inflation. In addition, employee
compensation expense is a principal cost element of facility
operations and is also dependent upon local market conditions.
There can be no assurance that resident fees will increase or
that costs will not increase due to inflation or other causes.
At March 31, 2005, approximately $483.6 million of our
indebtedness and lease payments bore interest at floating rates.
We have mitigated $432.9 million of our exposure to
floating rates by using $252.0 million of interest rate
swaps and $180.9 million of interest rate caps under our
lease arrangements. We plan to repay the remaining unhedged
floating-rate debt with a portion of the proceeds of this
offering. Inflation, and its impact on floating interest rates,
could affect the amount of interest payments due on such debt.
Application of Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with
accounting principles generally accepted in the United States,
or GAAP, requires us to make estimates and judgments that affect
our reported amounts of assets and liabilities, revenues and
expenses. We consider an accounting estimate to be critical if
it requires assumptions to be made that were uncertain at the
time the estimate was made and changes in the estimate, or
different estimates that could have been selected, could have a
material impact on our combined results of operations or
financial condition. We have identified the following critical
accounting policies that affect significant estimates and
judgments.
Self-Insurance Liability Accruals
We are subject to various legal proceedings and claims that
arise in the ordinary course of our business. Although we
maintain general liability and professional liability insurance
policies for our owned, leased and managed facilities under a
master insurance program, our current policy provides for
deductibles of $1.0 million for each and every claim. As a
result, we are effectively self-insured for most claims. In
addition, we maintain a self-insured workers compensation
program (with excess loss coverage of $0.5 million per
individual claim) and a self-insured employee medical program
(with excess loss coverage of $0.2 million to
$0.3 million per individual claim). We are self-insured for
amounts below these excess loss coverage amounts. We review the
adequacy of our accruals related to these liabilities on an
ongoing basis, using historical claims, actuarial valuations,
third-party administrator estimates, consultants, advice from
legal counsel and industry data, and adjust accruals
periodically. Estimated costs related to these self-insurance
programs are accrued based
55
on known claims and projected claims incurred but not yet
reported. Subsequent changes in actual experience are monitored
and estimates are updated as information is available.
Tax Valuation Allowance
We account for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109,
Accounting for Income Taxes
. Under this method, deferred
tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of
assets and liabilities using tax rates in effect for the year in
which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts that are expected to be
realized. As of March 31, 2005 and December 31, 2004,
we have a valuation allowance against deferred tax assets of
approximately $88.9 million and $89.3 million,
respectively. When we determine that it is more likely than not
that we will be able to realize our deferred tax assets in the
future in excess of our net recorded amount, an adjustment to
the deferred tax asset would increase stockholder's equity
in the period such determination is made. This determination
will be made by considering various factors, including our
expected future results, that in our judgment will make it more
likely than not that these deferred tax assets will be realized.
Lease Accounting
We determine whether to account for our leases as either
operating or capital leases depending on the underlying terms.
As of December 31, 2004, we operated 307 facilities
under long-term leases with $2,904.3 million of operating
and $107.6 million of capital and financing lease
obligations. The determination of this classification is complex
and in certain situations requires a significant level of
judgment. Our classification criteria is based on estimates
regarding the fair value of the leased facilities, minimum lease
payments, our effective cost of funds, the economic life of the
facility and certain other terms in the lease agreements. As
stated in our combined financial statements included elsewhere
in this prospectus, facilities under operating leases are
accounted for in our statement of operations as lease expenses
for actual rent paid plus or minus straight-line adjustments for
fixed or estimated minimum lease escalators and amortization of
deferred gains. For facilities under capital lease and lease
financing obligation arrangements, a liability is established on
our balance sheet and a corresponding long-term asset is
recorded. Lease payments are allocated between principal and
interest on the remaining base lease obligations and the lease
asset is depreciated over the term of the lease. In addition, we
amortize leasehold improvements purchased during the term of the
lease over the shorter of their economic life or the lease term.
Sale-leaseback transactions are recorded as lease financing
obligations when the transactions include a form of continuing
involvement, such as purchase options.
Two of our leases provide for various additional lease payments
based on changes in the interest rates on the debt underlying
the lease. All of our leases contain fixed or formula based rent
escalators. To the extent that the escalator increases are tied
to a fixed index or rate, lease payments are accounted for on a
straight-line basis over the life of the lease. In addition, we
recognize all rent-free or rent holiday periods in operating
leases on a straight-line basis over the lease term, including
the rent holiday period.
Allowance for Doubtful Accounts
Accounts receivable are reported net of an allowance for
doubtful accounts, to represent our estimate of the amount that
ultimately will be realized in cash. The allowance for doubtful
accounts was $2.7 million, $2.9 million and
$7.6 million as of March 31, 2005, December 31,
2004 and December 31, 2003, respectively. The adequacy of
our allowance for doubtful accounts is reviewed on an ongoing
basis, using historical payment trends, write-off experience,
analyses of receivable portfolios by payor source and aging of
receivables, as well as a review of specific accounts, and
adjustments are made to the allowance as necessary. Changes in
legislation are not expected to
56
have a material impact on collections; however, changes in
economic conditions could have an impact on the collection of
existing receivable balances or future allowance considerations.
Long-lived Assets and Goodwill
As of March 31, 2005 and December 31, 2004, our
long-lived assets were comprised primarily of
$519.9 million and $519.5 million, respectively, of
property, plant and equipment. In accounting for our long-lived
assets, other than goodwill, we apply the provisions of SFAS
No. 141,
Business Combinations
, and
SFAS No. 144,
Accounting for the Impairment or
Disposal of Long-Lived Assets
. Beginning January 1,
2002, we accounted for goodwill under the provisions of
SFAS No. 142,
Goodwill and Other Intangible
Assets
. As of March 31, 2005 and December 31,
2004, we had $9.0 million of goodwill.
In determining the allocation of the purchase price of
facilities to net tangible and identified intangible assets
acquired, we make estimates of the fair value of the tangible
and intangible assets using information obtained as a result of
pre-acquisition due diligence, marketing, leasing activities and
independent appraisals. We allocate a portion of the purchase
price to the value of leases acquired based on the difference
between the facility valued with existing leases adjusted to
market rental rates and the facility valued as if vacant.
The determination and measurement of an impairment loss under
these accounting standards requires the significant use of
judgment and estimates. The determination of fair value of these
assets utilizes cash flow projections that assume certain future
revenue and cost levels, assumed cap and discount rates based
upon current market conditions and other valuation factors, all
of which involve the use of significant judgment and estimation.
Future events may indicate differences from management's
current judgments and estimates, which could, in turn, result in
impairment. Future events that may result in impairment charges
include increases in interest rates, which would impact discount
rates, differences in projected occupancy rates and changes in
the cost structure of existing communities.
Recently Issued Accounting Pronouncements
SFAS No. 123, Share-Based Payment
In December 2004, the Financial Accounting Standards Board
("FASB") issued SFAS No. 123 (revised),
Share-Based Payment
, which addresses the accounting for
transactions in which an entity exchanges its equity instruments
for goods or services, with a primary focus on transactions in
which an entity obtains employee services in share-based payment
transactions. SFAS No. 123R is a revision to
SFAS No. 123 and supersedes Accounting Principles
Board (AB) Opinion No. 25,
Accounting for Stock
Issued to Employees
, and its related implementation
guidance. For all companies, this Statement will require
measurement of the cost of employee services received in
exchange for stock compensation based on the grant-date fair
value of the employee stock options. Incremental compensation
costs arising from subsequent modifications of stock awards
after the grant date must be recognized. This Statement will be
effective for us as of January 1, 2006. The impact of
adoption of this statement is not known at this time.
FASB Interpretation No. 46, Consolidation of Variable
Interest Entities
In December 2003, the "FASB" issued FIN 46R. This
Interpretation addresses the consolidation by business
enterprises of primary beneficiaries in variable interest
entities ("VIEs") as defined in the Interpretation.
We developed and manage five facilities for third-party
entities, for which we have guaranteed certain debt obligations
and have the right to purchase or lease the facilities. We
evaluated our relationship with the entities that own the
facilities pursuant to FIN 46R, and determined they are
VIEs, of which we are the primary beneficiary. We elected to
adopt FIN 46R as of December 31,
57
2003 and accordingly, consolidated the entities as of
December 31, 2003 in the accompanying financial statements.
On March 1, 2005, we obtained legal title to four of the
VIEs (The Meadows of Glen Ellyn, The Heritage of Raleigh,
Trillium Place and The Hallmark of Creve Coeur facilities). As
these four VIEs were previously consolidated pursuant to
FIN 46R, the legal acquisition of the facilities had
minimal accounting impact. At March 31, 2005, The Hallmark,
Battery Park City remains consolidated pursuant to FIN 46R.
Off-Balance Sheet Arrangements
We have one joint venture with an affiliate of Northwestern
which owns and operates two facilities, The Heritage of
Southfield, Southfield, Michigan (which includes
218 units/beds) and The Devonshire of Mt. Lebanon,
Mt. Lebanon (Pittsburgh), Pennsylvania (which includes
217 units/beds), which represents 1.7% of our total unit
capacity. The venture partner made a first mortgage loan to a
third facility owned by us, The Heritage at Gaines Ranch,
Austin, Texas (which includes 208 units/beds) and the
venture made a mezzanine loan of $12.7 million to the
entity that owns the facility. Pursuant to the terms of the
mezzanine loan, all net cash flow, including sale or refinancing
proceeds, is payable to the venture. Pursuant to the terms of
the venture agreements all net cash flow, including sale or
refinancing proceeds, is distributed to the venture partner
until it receives a 16% compounded return and then net cash flow
is distributed 60% to the venture partner and 40% to us. Capital
contributions, if any, are contributed 75% by the venture
partner and 25% by us.
We developed and managed eight facilities for a third party. In
addition, we indemnified the owner for any federal or state tax
liabilities associated with the ownership of the facilities.
Three of the facilities were purchased in 2002 and in September
2003 they were sold or refinanced by the joint venture described
above. As described above, effective December 31, 2003, the
remaining five facilities (which include 1,104 units/beds)
were consolidated in our financial statements pursuant to
FIN 46R. Prior to purchasing and consolidating the
facilities in our financial statements, we recorded management
fees of 5% - 7% of gross revenues with respect to the facilities
in our combined financial statements.
As described above, on March 1, 2005, we purchased four of
the facilities (which include 887 units/beds). We expect to
purchase the fifth facility (which includes 217 units/beds)
during the third quarter of 2005. Although the facilities were
consolidated effective December 31, 2003, pursuant to
FIN 46R, they were not included in our Federal and state
income tax returns until we purchased them. On March 30,
2005, we obtained $182.0 million of first mortgage
financing to refinance the existing indebtedness on the five
facilities.
Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risks from changes in interest rates
charged on our credit facilities used to finance acquisitions on
an interim basis, floating-rate indebtedness and lease payments
subject to floating rates. The impact on earnings and the value
of our long-term debt and lease payments are subject to change
as a result of movements in market rates and prices. As of
December 31, 2004, we had approximately $371.0 million
of long-term fixed rate debt, $107.6 million of capitalized
lease obligations, and $2,904.3 million of operating lease
obligations. As of December 31, 2004, our total fixed-rate
debt and variable-rate debt outstanding had weighted-average
interest rates of 7.63% and 7.60%, respectively.
We do not expect changes in interest rates to have a material
effect on earnings or cash flows since 100% of our debt and
lease payments either have fixed rates or variable rates that
are subject to swap agreements with major financial institutions
to manage our risk.
58
The following table presents future principal payment
obligations and weighted-average interest rates as of
December 31, 2004 associated with long-term debt
instruments ($ in 000s).
Weighted
Average
Expected Maturity Date — Year Ended December 31,
Interest
Rate
Total
2005
2006
2007
2008
2009
Thereafter
Mortgage notes payable 2008 through
    2009
6.42%
$
24,578
$
466
$
470
$
480
$
6,740
$
16,422
$
—
Mortgage Notes payable 2005 through
    2037
8.45%
75,903
1,199
1,391
1,378
1,570
67,078
3,287
Construction and mezzanine loans
9.61%
179,248
1,091
—
—
178,157
—
—
Capital and financing lease
    obligation
11.83%
66,284
—
—
—
—
—
66,284
Mezzanine loan
(1
)
12,739
—
—
—
—
—
12,739
Serial and term revenue bonds
7.36%
2,865
310
330
345
385
415
1,080
Notes payable-joint venture
9.00%
9,420
822
1,129
1,234
6,235
—
—
Total Debt
$
371,037
$
3,888
$
3,320
$
3,437
$
193,087
$
83,915
$
83,390
(1)
Payable to the extent of all available net cash flow (as
    defined).
Non-GAAP Financial Measures
There are material limitations to using measures such as
Adjusted EBITDA, Cash Earnings and Facility Operating Income,
including an inability to compare results with other companies
and to analyze significant items (including depreciation,
interest and lease expense) that directly affect our income or
loss. We compensate for these limitations by considering the
economic effect of the excluded amounts independently, as well
as in connection with our analysis of net income. Adjusted
EBITDA, Cash Earnings and Facility Operating Income is
considered in addition to, but not as a substitute for, other
measures of financial performance reported in accordance with
GAAP.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure used by management to
evaluate our operations and is commonly used in the industry,
and is not used as a substitute for income from operations, net
income (loss), or cash flows provided by or used in operations,
investing or financing activities or other balance sheet, income
or cash flow statement data prepared in accordance with GAAP. We
define Adjusted EBITDA as net income (loss) before non-operating
(income) loss, depreciation and amortization, (gain) loss
on sale of facilities, straight-line rent expense (income),
amortization of deferred entrance fees and non-cash compensation
expense and including entrance fee receipts and refunds. We
believe Adjusted EBITDA gives investors a more accurate picture
of cash generated by us because:
•
It is a primary measure used by management to evaluate the
    economic productivity of our operations;
•
It is widely used to measure performance without regard to such
    items as depreciation and amortization, which can vary depending
    on the book value and depreciable lives of assets; and
•
It helps investors meaningfully evaluate and compare the results
    of our operations from period to period by removing the impact
    of our capital structure (primarily interest on our outstanding
    debt and non-cash lease expense and credit) and asset base
    (primarily depreciation and amortization).
59
Our management uses Adjusted EBITDA:
•
In its presentations to the board of directors to enable the
    board to have the same measurement of operating performance used
    by management;
•
For planning purposes, including preparation of our annual
    budget;
•
As a valuation measure in strategic analysis in connection with
    lease and debt financing alternatives and the purchase and sale
    of assets; and
•
As a measure of operating structure to remove the impact of our
    capital structure (primarily interest on our outstanding debt
    and non-cash lease expense or credits) and asset base (primarily
    depreciation and amortization).
The table below shows Adjusted EBITDA for the three months ended
March 31, 2005 and 2004 and the years ended
December 31, 2004, 2003 and 2002.
Three Months
Ended
March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
Net income (loss)
$
(4,473
)
$
(9,067
)
$
(21,889
)
$
(16,499
)
$
11,717
Cumulative effect of a change in
    accounting principle, net
—
—
—
13,208
—
Loss on discontinued operations
116
1,367
1,203
1,072
—
Provision (benefit) for income taxes
120
(1,260
)
10,630
(290
)
8,666
Other
246
974
114
—
—
Equity in (earnings) loss of
    unconsolidated ventures
187
373
931
(318
)
(584
)
Loss (gain) extinguishment of
    debt
453
—
(1,051
)
(12,511
)
—
Loss on sale of properties
—
—
—
24,513
—
Interest expense:
Debt
6,623
16,236
55,851
24,484
9,490
Capitalized lease obligation
2,276
1,931
7,783
622
—
Change in fair value of derivatives
(4,062
)
2,832
(3,176
)
—
—
Interest Income
(362
)
(224
)
(637
)
(14,037
)
(18,004
)
Income From Operations
1,124
13,162
49,759
20,244
11,285
Depreciation and amortization
5,596
14,597
52,307
22,480
13,708
Straight-line lease expense (income)
6,094
(62
)
4,588
1,102
3,837
Amortization of deferred gain
(2,296
)
(135
)
(2,260
)
(539
)
(230
)
Non-cash compensation expense
—
—
—
—
—
Entrance fee receipts
—
—
—
—
—
Entrance fee disbursements
—
—
—
—
—
Adjusted EBITDA
$
10,518
$
27,562
$
104,394
$
43,287
$
28,600
Cash Earnings
Cash Earnings is a non-GAAP measure used by management to
evaluate our operations and to assess our capacity to pay
dividends and is not used as a substitute for income from
operations, net income (loss), or cash flows provided by or used
in operations, investing or financing activities or other
balance sheet, income or cash flow statement data prepared in
accordance with GAAP. We
60
define Cash Earnings as Adjusted EBITDA (as defined above) after
interest expense (including capitalized lease expense), interest
income and recurring capital expenditures. We believe Cash
Earnings gives investors a more accurate picture of cash
generated by us because:
•
It is a primary measure used by management to evaluate the
    economic productivity of our operations;
•
It is widely used to measure performance without regard to such
    items as depreciation and amortization, which can vary depending
    on the book value and depreciability of assets; and
•
It helps investors meaningfully evaluate and compare the results
    of our operations from period to period by removing the impact
    of our asset base (primarily depreciation and amortization).
Our management uses Cash Earnings:
•
In its presentations to the board of directors to enable the
    board to have the same measurement of operating performance used
    by management;
•
For planning purposes, including preparation of our annual
    budget;
•
As a valuation measure in strategic analysis in connection with
    lease and debt financing alternatives and the purchase and sale
    of assets;
•
As a measure of operating structure to remove the impact of our
    asset base (primarily depreciation and amortization); and
•
To assess our cash available for dividends to stockholders.
The table below shows the reconciliation of Adjusted EBITDA to
Cash Earnings for the three months ended March 31, 2005 and
2004 and the years ended December 31, 2004, 2003 and 2002.
Three Months
Ended
March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
Adjusted EBITDA
$
10,518
$
27,562
$
104,394
$
43,287
$
28,600
Interest expense
(6,623
)
(16,236
)
(55,851
)
(24,484
)
(9,490
)
Capitalized lease obligation
(1,983
)
(1,931
)
(7,783
)
(622
)
—
Interest income
362
224
637
14,037
18,004
Recurring capital expenditures
(3,428
)
(1,999
)
(13,527
)
(4,434
)
(3,291
)
Cash Earnings
$
(1,154
)
$
7,620
$
27,870
$
27,784
$
33,823
Facility Operating Income
Facility Operating Income is defined as resident fees less
facility operating expenses. We believe this is a useful measure
used by management to determine the operating results of our
facilities, which can be used to service indebtedness or lease
obligations (which are generally fixed rate debt or leases, or
floating rate debt or leases hedged by interest rate swaps and
interest rate caps).
Our management uses Facility Operating Income:
•
In its presentations to the board of directors to enable the
    board to have a measure of facility operating performance;
•
For planning purposes, including preparation of our annual
    budget and capital resource allocations;
61
•
As a valuation measure in strategic financing alternatives and
    the purchase and sale of facilities; and
•
To evaluate the impact of a facility's operations on our
    operating income;
Our lenders and lessors use Facility Operating Income:
•
To evaluate the performance of a given facility or the
    facilities securing the indebtedness or lease obligation;
•
To evaluate debt service and lease coverage ratios; and
•
As a valuation measure in strategic analyses in connection with
    the financing and sale of facility alternatives.
The table below shows Facility Operating Income for the three
months ended March 31, 2005 and 2004, and the years ended
December 31, 2004, 2003 and 2002:
Three Months
Ended
March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
Resident fees
$
174,112
$
154,583
$
657,327
$
217,216
$
156,894
Facility operating expenses
(110,328
)
(99,810
)
(415,169
)
(133,119
)
(92,980
)
Facility operating income
$
63,784
$
54,773
$
242,158
$
84,097
$
63,914
Facility operating margin
36.6
%
35.4
%
36.8
%
38.7
%
40.7
%
62
INDUSTRY OVERVIEW
The Senior Living Industry
Housing alternatives for seniors include a broad spectrum of
senior living service and care options, including independent
living, assisted living, memory care, skilled nursing care and
continuing care retirement communities, or CCRCs.
•
Independent living
is designed for seniors who choose to
    live in an environment surrounded by their peers where they pay
    for certain services such as housekeeping, meals and activities
    as part of their monthly resident fee, but are generally not
    reliant on assistance with activities of daily living, or ADLs,
    such as bathing, eating, toileting, transferring and dressing;
    some residents however, may contract with outside providers for
    those services. Independent living residents tend to move into a
    facility by choice, oftentimes to be in a metropolitan area that
    is closer to their adult children. According to ASHA, there are
    approximately 6,200 independent living facilities nationwide
    with approximately 723,300 units.
•
Assisted living
is designed for seniors who seek housing
    with supportive care and services, including assistance with
    activities of daily living, memory care and other services (for
    example, housekeeping, meals and activities). Assisted living
    residents tend to move into a facility both by choice and by
    necessity. According to ASHA, there are approximately 7,270
    assisted living facilities nationwide with approximately 543,450
    beds.
•
Memory care
is designed for seniors who suffer from
    Alzheimer's disease or other forms of dementia or memory
    impairment. Memory care facilities are designed to provide a
    safe and secure physical environment while providing assisted
    living services together with programming appropriate to the
    needs of those with Alzheimer's disease or other forms of
    dementia.
•
Skilled nursing
is designed for seniors whose care needs
    require 24-hour skilled nursing services or who are receiving
    certain medical services.
•
Continuing Care Retirement Communities
offer a variety of
    living arrangements and services to accommodate residents of
    varying levels of physical ability and health. The goal of a
    CCRC is to accommodate changing lifestyle preferences and health
    care needs. Generally, CCRCs make independent living, assisted
    living and skilled nursing available all on one campus location.
In all of these settings, seniors may elect to bring in
additional care and services as needed, such as home-health care
(except in a skilled nursing setting) and end-of-life or hospice
care.
The senior living industry is highly fragmented and
characterized predominantly by numerous local and regional
operators. Senior living providers may operate freestanding
independent living, assisted living or skilled nursing
residences, or communities that feature a combination of
options, such as CCRCs. The level of care and services offered
by providers varies along with the size of communities, number
of residents served and design of facilities (for example,
purpose-built communities or refurbished structures).
Industry Trends
The senior living industry has evolved to meet the growing
demand for senior care generated by an aging population
demanding new and better housing alternatives. We believe that
we are well positioned to capitalize on a number of trends in
the senior living industry, including:
•
An increasing number of seniors with longer life
    expectancies and financial resources to support a private pay
    model.
According to the U.S. Census Bureau, the
    population greater than 65 years old is expected to
    increase to approximately 20% of the overall
    U.S. population during the next 25 years, from
    approximately 12% in 2000. As life expectancy continues to
    increase and the elderly continue to become a higher percentage
    of
63
the total U.S. population, we believe the demand for
    service-based senior housing will increase. In addition, seniors
    in the areas in which we operate tend to have a significant
    amount of assets generated from savings, pensions and, due to
    strong national housing markets, the sale of private homes. We
    believe seniors increasingly will have the ability to afford
    senior living services.
•
Fragmentation in the industry provides significant
    acquisition and consolidation opportunities.
The senior
    living industry's independent living and assisted living
    segments are large and fragmented, characterized predominantly
    by numerous local and regional operators. According to ASHA the
    top five operators of senior living facilities measured by total
    resident capacity control only 7% of the total capacity. In
    addition, according to ASHA, only the top 5 managers operate
    more than 14,000 senior living units/beds. We believe that this
    fragmentation provides significant acquisition and consolidation
    opportunities.
•
Majority of independent and assisted living revenue growth
    generated from private pay sources.
Because we generate
    over 98% of our revenues from private pay customers, our
    resident fees are not constrained by regulatory or other
    governmental considerations. Independent and assisted living
    services are not generally reimbursable under government
    reimbursement programs such as Medicare and Medicaid and thus we
    have limited exposure to reimbursement risk.
•
Favorable and improving supply and demand balance.
We believe that the number of vacant senior living units has
    declined steadily over the past several years. According to
    ASHA, the number of new senior housing units identified as under
    construction has declined approximately 60% from
    65,879 units in 1999 to 26,355 units in 2004. Combined
    with increasing life expectancies, we believe there is a
    favorable and improving supply and demand balance.
64
BUSINESS
Overview
We are the third largest operator of senior living facilities in
the United States based on total capacity, with over
380 facilities in 32 states and the ability to serve
over 30,000 residents. We offer our residents access to a full
continuum of services across all sectors of the senior living
industry. As of June 30, 2005, we operated 81 independent
living facilities with 14,619 units, 291 assisted living
facilities with 12,342 beds, eight continuing care retirement
communities, or CCRCs, with 3,238 units/beds (including 825
resident-owned cottages on our CCRC campuses managed by us) and
one skilled nursing facility with 82 units/beds. The
majority of our units/beds are located in campus settings or
facilities containing multiple services, including CCRCs. As of
June 30, 2005, our facilities were on average 88.1%
occupied. We generate over 98% of our revenues from private pay
customers, which limits our exposure to government reimbursement
risk. In addition, we control the operating economics of our
facilities through property ownership and long-term leases. We
believe we operate in the most attractive sectors of the senior
living industry with significant opportunities to increase our
revenues through providing a combination of housing, hospitality
services and health care services. For the three months ended
March 31, 2005, 13.7% of our revenues were generated from
owned facilities, 85.8% from leased facilities and 0.5% from
management fees from facilities we operate on behalf of third
parties and affiliates.
We were formed in June 2005 for the purpose of combining two
leading senior living operating companies, Brookdale Living
Communities, Inc., or BLC, and Alterra Healthcare Corporation,
or Alterra. BLC and Alterra have been operating independently
since 1986 and 1981, respectively. Since December 2003, BLC and
Alterra have been under the common control of Fortress. Fortress
is not selling any shares of common stock in this offering.
Following this offering, Fortress will own
43,157,000 shares, or over 60%, of our common stock.
We plan to grow our revenue and operating income through a
combination of: (i) organic growth in our existing
portfolio; (ii) acquisitions of additional operating
companies and facilities; and (iii) the realization of
economies of scale, including those created by the BLC and
Alterra combination. Given the size and breadth of our
nationwide platform, we believe that we are well positioned to
invest in a broad spectrum of assets in the senior living
industry. Since January 2001, we have begun leasing or acquired
the ownership or management of 52 senior living facilities with
approximately 11,000 units/beds. In 2005, we acquired the
ownership or management of 16 senior living facilities with
4,266 units/beds (including 825 resident-owned
cottages on our CCRC campuses managed by us) and an additional
facility with 233 units/beds, which is currently under
contract for sale.
Our facilities are predominantly concentrated in the independent
and assisted living portion of the senior housing continuum as
depicted below:
SENIOR HOUSING CONTINUUM OF CARE
We believe that the senior living industry is the preferred
alternative to meet the growing demand for a cost-effective
residential setting in which to care for the elderly who cannot,
or as a lifestyle choice choose not to, live independently due
to physical or cognitive frailties and who may,
65
as a result, require assistance with some of the activities of
daily living or the availability of nursing or other medical
care. Housing alternatives for seniors include a broad spectrum
of senior living service and care options, including independent
living, assisted living, memory care and skilled nursing care.
More specifically, senior living consists of a combination of
housing and the availability of 24-hour a day personal support
services and assistance with certain activities of daily living.
For the year ended December 31, 2004, and the three months
ended March 31, 2005, we generated:
Pro Forma(1)
Three Months
Ended
Year Ended
March 31,
December 31,
2005
2004
($ in millions)
Revenues
$
204.7
$
790.2
Facility Operating Income(2)
$
75.2
$
290.7
Net Income (Loss)
$
(12.3
)
$
(59.5
)
Adjusted EBITDA(3)
$
22.4
$
81.9
Cash Earnings(4)
$
7.9
$
24.2
(1)
See "Summary Combined Financial Information" and
    "Unaudited Pro Forma Condensed Financial Information"
    for a description of the adjustments included in the pro forma
    results.
(2)
Facility Operating Income is a non-GAAP financial measure we use
    in evaluating our performance. See "Summary Combined
    Financial Information" for a computation of this measure
    and "Management's Discussion and Analysis of Financial
    Condition and Results of Operations — Non-GAAP
    Financial Measures — Facility Operating Income"
    for a detailed description of why we believe such measure is
    useful.
(3)
Adjusted EBITDA is a non-GAAP financial measure we use in
    evaluating our performance. See "Summary Combined Financial
    Information" for a reconciliation of this measure to net
    income and "Management's Discussion and Analysis of
    Financial Condition and Results of Operations —
    Non-GAAP Financial Measures — Adjusted EBITDA"
    for a detailed description of why we believe such measure is
    useful.
(4)
Cash Earnings is a non-GAAP financial measure we use in
    evaluating our performance. See "Summary Combined Financial
    Information" for a reconciliation of this measure to net
    income and "Management's Discussion and Analysis of
    Financial Condition and Results of Operations —
    Non-GAAP Financial Measures — Cash Earnings," for
    a detailed description of why we believe such measure is useful.
Growth Strategy
Our objective is to increase our revenues, Adjusted EBITDA, Cash
Earnings and dividends per share of our common stock, while
remaining one of the premier senior living providers in the
United States. Key elements of our strategy to achieve these
objectives include:
•
Organic growth in our existing operations.
We plan
    to grow our existing operations by:
•
increasing revenues through a combination of occupancy growth
    and resident fee increases as a result of growing demand for
    senior living facilities. For the 343 facilities we owned,
    leased or managed since 2003 (excluding four development
    facilities), our facility operating income has increased
    approximately 7.0% on an annualized basis and, including the
    four development facilities, our facility operating income has
    increased approximately 8.0% on an annualized basis; and
66
•
taking advantage of our sophisticated operating and marketing
    expertise to retain existing residents and attract new residents
    to our facilities. As of June 30, 2005, our facilities were
    on average 88.1% occupied.
•
Growth through operating efficiencies.
We intend
    to utilize our expertise and size to capitalize on economies of
    scale resulting from our national platform. Our geographic
    footprint and centralized infrastructure provide us with a
    significant operational advantage over local and regional
    operators of senior living facilities. As a result, we are able
    to achieve economies of scale with respect to the goods and
    services we purchase. In connection with the combination of BLC
    and Alterra, we have negotiated new contracts for food,
    insurance and other services. In addition, we will reduce the
    size of our corporate workforce through a consolidation of
    corporate functions such as accounting, finance, human resources
    and legal. Collectively, we expect these initiatives to result
    in recurring operating and general and administrative expense
    savings, net of additional recurring costs expected to be
    incurred as a public company, of between approximately
    $13.0 million and $15.0 million pet year. We began to
    realize these savings upon the completion of our formation
    transactions
    in                     2005.
    See "Management's Discussion and Analysis of Financial
    Condition and Results of Operations — Formation
    Transaction." As we continue to grow both organically and
    through acquisitions, we expect to have further opportunities to
    realize other synergies and operating efficiencies.
•
Growth through the acquisition and consolidation of asset
    portfolios and other senior living companies.
We plan to
    take advantage of the fragmented independent living and assisted
    living sectors by selectively purchasing existing operating
    companies and facilities. Since January 2001, we have begun
    leasing or acquired the ownership or management of 52 senior
    living facilities with approximately 11,000 units/beds. In
    2005, we acquired the ownership or management of 16 senior
    living facilities with 4,266 units/beds (including 825
    resident-owned cottages on our CCRC campuses managed by us) and
    an additional facility with 233 units/beds, which is
    currently under contract for sale. Our acquisition strategy will
    continue to focus primarily on facilities where we can improve
    service delivery, occupancy rates and cash flow. We expect to
    finance our acquisitions, on a long-term basis, by using
    primarily equity issuances combined with fixed- and
    floating-rate debt.
•
Expansion of existing facilities where economically
    advantageous.
Certain of our facilities with stabilized
    occupancies and excess demand in their respective markets may
    benefit from additions and expansions (which additions and
    expansions may be subject to landlord, lender and other third
    party consents) offering increased capacity, as well as
    additional levels of service for residents requiring higher
    levels of care. Furthermore, the expansion of existing
    facilities allows us to enhance our facility-level return on
    investment by increasing the revenue base at a facility with
    lower incremental operating costs.
Competitive Strengths
We believe our nationwide network of senior living facilities is
well positioned to benefit from the growth and increasing demand
in the industry. Some of our most significant competitive
strengths are:
•
Skilled management team with extensive experience.
Our senior management team has extensive experience in
    acquiring, operating and managing a broad range of senior living
    assets. Our chairman and top five executive officers have over
    115 years of combined experience in the senior living,
    hospitality and real estate industries. In addition, as
    stockholders, our management team is incentivized to continue to
    grow our business. Following this offering, our senior
    management team will own
    approximately        % of our
    common stock on a fully diluted basis.
•
Proven track record of successful acquisitions.
Since January 2001, we have begun leasing or acquired the
    ownership or management of 52 senior living facilities with
    approximately 11,000 units/beds. Our experience in
    acquiring senior living facilities enables
67
us to consider a wide range of acquisition targets in the senior
    living industry. In addition, we believe our expertise in
    integrating these facilities onto our operating platform enables
    us to acquire facilities while causing minimal disruption to
    either the residents or facility operating staff.
•
High-quality purpose-built facilities.
We operate
    a nationwide base of over 380 purpose-built facilities in
    32 states, including 66 facilities in eight of the top
    ten SMSAs. The average age of our facilities is 9.7 years.
    We have experienced significant facility operating income growth
    and occupancy growth over the past year. Our facility operating
    income increased 16.4%, from $54.8 million for the three
    months ended March 31, 2004 to $63.8 million for the
    three months ended March 31, 2005, and our occupancy rate
    increased 0.7%, from 86.8% as of March 31, 2004 to 87.5% as
    of March 31, 2005. For the 347 and 343 (excluding four
    development facilities) facilities we have operated since
    January 1, 2004, our facility operating income increased
    8.7% and 7.4%, respectively, for the three months ended
    March 31, 2005, as compared to the three months ended
    March 31, 2004.
•
Ability to provide a broad spectrum of care.
Given
    our diverse mix of independent and assisted living facilities
    and CCRCs, we are able to meet a wide range of our
    customers' needs. We believe that we are one of the few
    companies in the senior living industry with this capability. We
    believe that our multiple product offerings create marketing
    synergies and cross-marketing opportunities.
•
The size of our business allows us to realize cost
    efficiencies.
We are the third largest operator of
    senior living facilities in the United States based on total
    capacity. The size of our business allows us to realize cost
    savings in the purchasing of goods and services and also allows
    us to achieve increased efficiencies with respect to various
    corporate functions, most of which have yet to be realized in
    our operating results given the recent combination of BLC and
    Alterra
    in                     2005.
    In addition, our size and broad geographical footprint gives us
    an advantage in executing our acquisition strategy. When we
    acquire a facility in a location where we already operate, we
    are able to integrate the additional facility with limited or no
    incremental cost. This allows us to acquire assets more
    efficiently and to better compete against other operators for
    acquisitions with a more geographically limited presence.
History
We are a holding company formed in June 2005 for the purpose of
combining, through a series of mergers, two leading senior
living operating companies, BLC and Alterra, which have been
operating independently since 1986 and 1981, respectively.
Fortress has been the majority owner of BLC since September 2000
and of Alterra since December 2003. In addition, we recently
acquired, through affiliates of Fortress, the ownership or
management of 16 additional senior living facilities, not
including one facility currently under contract for sale. In
June and July 2005, FIT REN LLC, an affiliate of Fortress, or
FIT REN, purchased eight senior living facilities and one senior
living facility, respectively, consisting of
1,261 units/beds from affiliates of Prudential Financial,
Inc. for an aggregate purchase price of approximately
$282.4 million, before closing costs. In April 2005,
Fortress CCRC Acquisition LLC (formerly known as Fortress NBA
Acquisition LLC), an affiliate of Fortress, or Fortress CCRC,
purchased eight senior living facilities with
3,238 units/beds from The National Benevolent Association
of the Christian Church (Disciples of Christ), or the NBA, as
debtor-in-possession under Chapter 11 of the
U.S. bankruptcy code for an aggregate purchase price of
approximately $181.4 million, before closing costs. Of
these eight facilities, Fortress CCRC sold one on July 1,
2005 for $2.5 million, and one is under contract for sale.
Subsequent to the acquisition of these facilities by FIT REN and
Fortress CCRC, the facilities have been managed by affiliates of
BLC. As described below, we acquired ownership of the properties
purchased by FIT REN and Fortress CCRC
in                     2005
at a price equal to the purchase price for which each of FIT REN
and Fortress CCRC acquired the respective facilities. It is our
intention to continue to own and manage the nine facilities
originally purchased by FIT REN and six facilities originally
purchased
68
by Fortress CCRC, and to manage the facility that Fortress CCRC
sold on July 1, 2005.
In           2005,
the following series of transactions occurred:
•
A wholly-owned subsidiary of ours merged with and into BLC. In
    the merger, the stockholders of BLC, including affiliates of
    Fortress, an affiliate of Capital Z Partners and certain members
    of our management, received an aggregate of
    20,000,000 shares of our common stock, representing 34.5%
    of our outstanding common stock prior to this offering, for all
    of their outstanding common stock of BLC. As a result of the
    merger, BLC became our wholly-owned subsidiary.
•
Alterra purchased from Fortress Investment Trust II, an
    affiliate of Fortress, all of the outstanding membership
    interests of FIT REN, which had recently acquired certain senior
    living facilities from Prudential Financial, Inc., as described
    in "— Acquisition and History of Alterra
    Healthcare Corporation," for an aggregate purchase price of
    approximately $282.4 million before closing costs
    (including the assumption of approximately $171.0 million
    of debt). As a result of the purchase, FIT REN became a
    wholly-owned subsidiary of Alterra and Fortress Investment
    Trust II became a member of FEBC-ALT Investors LLC, or
    FEBC-ALT Investors, Alterra's indirect parent company. In
    connection with the merger of FEBC-ALT Investors described
    below, Fortress Investment Trust II received
    11,750,000 shares of our common stock, representing 20.3%
    of our outstanding common stock prior to this offering, for its
    interest in FIT REN.
•
A wholly-owned subsidiary of ours merged with and into FEBC-ALT
    Investors, Alterra's indirect parent company. In the
    merger, FIT-ALT Investor LLC, Fortress Investment Trust II,
    Emeritus, NW Select and certain members of our management, each
    of which was a member of FEBC-ALT Investors, received an
    aggregate of 29,750,000 shares of our common stock,
    representing 51.3% of our outstanding common stock prior to this
    offering, for all of the outstanding membership interests of
    FEBC-ALT Investors. FIT-ALT Investor LLC and Fortress Investment
    Trust II are affiliates of Fortress. As a result of the merger,
    Alterra became our wholly-owned subsidiary.
•
A wholly-owned subsidiary of ours merged with and into Fortress
    CCRC. In the merger, Fortress Investment Trust II received
    an aggregate of 8,250,000 shares of our common stock,
    representing 14.2% of our outstanding common stock prior to this
    offering, for all of the outstanding membership interests of
    Fortress CCRC. Fortress CCRC owns, through its wholly-owned
    subsidiaries, seven senior living facilities, including one
    facility currently under contract for sale. As a result of the
    merger, Fortress CCRC became our wholly-owned subsidiary.
On August 5, 2005, BLC granted 988 shares of its stock
and FEBC-ALT Investors granted 3.3% of its membership interests
to certain members of our management, which shares and
percentage interests are subject to substantial risk of
forfeiture until the occurrence of certain events, as specified
in the applicable restricted stock or restricted securities
award agreements. In accordance with the terms of the plans, a
portion of these securities will no longer be subject to a risk
of forfeiture upon the consummation of this offering. In
addition, the remaining securities will vest over a five-year
period following the issuance if the executive remains
continuously employed by the Company. Securities that are
subject to risk of forfeiture may not be sold or transferred.
See "Business — Equity Incentive
Plans — Employee Restricted Stock Plans." In
connection with the merger transactions described above, these
shares were automatically converted into an aggregate of
2,577,652 shares of our common stock, representing 4.4% of
our outstanding common stock prior to this offering.
As a result of these formation transactions, prior to the
consummation of this offering, all of our outstanding common
stock is held by FIT-ALT Investor LLC, Fortress Investment
Trust II, Fortress Brookdale Acquisition LLC, or FBA, each
of which is an affiliate of Fortress, Health Partners, which is
an affiliate of Capital Z Partners, Emeritus, NW Select,
and certain members of our management. Each of Emeritus
Corporation and NW Select LLC is selling all of the shares of
our common stock it
69
owns in this offering. Fortress and its affiliates are not
selling any of the shares of our common stock that they own in
this offering.
See "Certain Relationships and Related Party
Transactions" for a more detailed description of our
relationships with these stockholders.
Acquisition and History of Brookdale Living Communities,
Inc.
In                     2005,
a wholly-owned subsidiary of ours merged with and into BLC,
resulting in the issuance of an aggregate of
20,000,000 shares of our common stock to the previous
holders of all of the outstanding common stock of BLC. As a
result of this transaction, BLC became our wholly-owned
subsidiary and (1) FBA, an affiliate of Fortress and the
former holder of a majority of the outstanding common stock of
BLC, and (2) Health Partners, a former member of FBA,
became significant stockholders of ours. See "Principal and
Selling Stockholders" and "Certain Relationships and
Related Party Transactions."
In June and July of 2005, subsidiaries of BLC entered into
management agreements/operating leases to operate eight senior
living facilities and one senior living facility, respectively,
consisting of 1,261 units/beds, which we refer to as the
Prudential Portfolio. See "— Acquisition and
History of Alterra Healthcare Corporation" for a
description of the acquisition history of the Prudential
Portfolio. Fortress and BLC received regulatory authorization to
operate these facilities in June and July 2005, respectively.
In April 2005, subsidiaries of BLC entered into management
agreements to operate eight facilities, six of which we own, one
of which we sold and still manage and one of which is currently
under contract for sale and which we will not continue to manage
after the sale is consummated, consisting of
3,238 units/beds, in the Fortress CCRC Portfolio. See
"— Acquisition and History of Fortress CCRC
Portfolio" for a description of the acquisition history of
the Fortress CCRC Portfolio. Fortress and BLC received
regulatory licenses required to operate these facilities in
April 2005.
In October 2004, Provident Senior Living Trust, or Provident, a
real estate investment trust, acquired 21 senior living
facilities from BLC through a stock acquisition, for a total
purchase price of approximately $742.4 million (including
the assumption of approximately $433.6 million of
non-recourse and limited recourse property-level and other
debt). BLC currently leases and operates all of the facilities
that it sold to Provident pursuant to long-term operating leases
and management agreements. See
"— Leases — BLC's Master Lease
Arrangements with Provident." In October 2004, BLC paid a
dividend of $254.6 million to all of its stockholders,
which represented a return of capital. The dividend was funded
with a portion of the proceeds from the Provident transaction.
In August 2004, BLC entered into management agreements to
operate nine facilities consisting of more than
1,900 units/beds owned by Cypress Senior Living, which we
refer to as the Town Village Portfolio. The Town Village
Portfolio consists of entirely independent living facilities,
ranging in size from 176 to 276 units/beds each. The
facilities are located in the metro areas of Detroit, Kansas
City, Memphis, Dallas, Birmingham, Fort Worth, and Tulsa,
all of which opened in the last three years, and Oklahoma City,
which opened in December 2004.
During the first quarter of 2004, the limited partnerships that
owned 14 facilities, in which subsidiaries of BLC held general
and limited partnership interests, sold those facilities to
Ventas Realty, Limited Partnership, or Ventas, for approximately
$114.6 million. Ventas also acquired another facility from
a third party in a separate transaction. Simultaneously with
such sales, wholly-owned subsidiaries of BLC, or the Ventas
Tenants, entered into and became the tenants under a master
lease with Ventas pursuant to which the Ventas Tenants currently
lease 13 facilities. Two additional facilities are leased to the
Ventas Tenants pursuant to individual leases substantially
similar to the master lease. BLC has guaranteed the leases for
the full and prompt payment and performance of all of Ventas
Tenants' obligations thereunder. The guaranty requires that
BLC maintain a net worth of not less than $100.0 million
(as defined). See "— Leases — Ventas
Lease Arrangement with BLC."
70
In November 2002, BLC purchased the following three facilities
consisting of 643 units/beds for approximately
$134.7 million, which it had previously developed and
managed for third party owners: The Heritage at Gaines Ranch, a
208-unit/beds facility located in Austin, Texas; The Heritage of
Southfield, a 217-unit/beds facility located in Southfield,
Michigan; and The Devonshire of Mt. Lebanon, a 218-unit/beds
facility located in Mt. Lebanon (Pittsburgh), Pennsylvania. The
total purchase price included cash of $41,000 plus the
assumption of all liabilities, including approximately
$76.1 million of first mortgage loans and approximately
$13.4 million of mezzanine financing provided by a
subordinate lender. At the date of purchase, the
$76.1 million of first mortgage loans and
$13.4 million of mezzanine financing, which were partially
guaranteed by BLC, were in default. BLC reached an agreement
with the lenders for BLC to repay the loans at an agreed-upon
amount and for the lenders to forbear on all claims until
December 31, 2003 and February 1, 2004, respectively.
In September 2003, BLC formed Brookdale Senior Housing, LLC, or
the NML Joint Venture, a joint venture with an affiliate of the
Northwestern Mutual Life Insurance Company, or Northwestern, and
effectively sold 75% of its interest in the Southfield and Mt.
Lebanon facilities to the NML Joint Venture. The NML Joint
Venture owns the Southfield and Mt. Lebanon facilities and was
capitalized with $66.3 million of cash, of which $144,000
was contributed by BLC, and the balance of which was contributed
by Northwestern in the form of $35.8 million of equity and
$30.4 million of first mortgage financing. The loans are
payable as interest only loans at the rate of 6.75% through
September 30, 2008, and 7.25% through maturity on
October 1, 2009. In addition, Northwestern made a
$16.4 million first mortgage loan to the owner of The
Heritage of Gaines Ranch, payable as an interest only loan at
6.75% through September 30, 2008, and 7.25% through
maturity on October 1, 2009, and the NML Joint Venture made
a $12.7 million mezzanine loan to the owner of The Heritage
of Gaines Ranch, payable at the rate of all available cash flow
and appreciation in the facility. In connection with the sale of
its interests in the Southfield and Mt. Lebanon facilities, BLC
received $51.6 million, which resulted in a loss on the
sale of $24.5 million. BLC used the proceeds to repay the
existing first mortgage and mezzanine loans and recognized a
gain on extinguishment of debt of $12.5 million, net of
costs. Subsidiaries of BLC manage each of these facilities for a
fee equal to 5% of gross revenues. Under certain limited
circumstances, BLC's management of these facilities can be
terminated by Northwestern.
In December 2001, BLC entered into an agreement to purchase
seven facilities from AIMCO consisting of 1,477 units/beds,
or the Chambrel Portfolio, for which it made earnest money
deposits in the aggregate amount of $4.0 million. The
deposits were funded with the proceeds of advances made to BLC
by Capstead Mortgage Corporation, or Capstead, a publicly traded
company in which an affiliate of Fortress held an interest. See
"Certain Relationships and Related Party
Transactions." In connection with the closing, BLC assigned
its rights under the purchase and sale agreements to
subsidiaries of Capstead and entered into seven operating leases
with subsidiaries of Capstead. See
"— Leases — Capstead Lease Arrangement
with BLC." On October 31, 2002, Capstead sold the
Chambrel at Windsong Care Center in Akron, Ohio, an 83 bed
skilled nursing center, and terminated the related operating
lease. The net cost of the remaining six facilities, consisting
of 1,394 units/beds, was approximately $148.7 million
(including the assumption of approximately $120.6 million
of debt).
In January 2001, BLC acquired a 45% interest in GFB-AS
Investors, LLC, or GFB, for approximately $5.7 million.
GFB, in turn, acquired the equity interests in the general
partners of various limited partnerships, or GC LPs, each of
which owns one senior living facility, and each of which were
previously owned or controlled by affiliates of Grand Court
Lifestyles, Inc., together with management contract rights and
certain loans receivable. A wholly-owned subsidiary of BLC
entered into management consulting agreements with each of the
GC LPs. The total initial investment in GFB was approximately
$12.8 million, of which BLC's share was approximately
$5.7 million and was funded from the proceeds of a loan
made by an affiliate of Fortress. In September 2002, the members
of GFB contributed approximately $2.6 million to fund
additional purchases of limited partnership interests in certain
GC LPs and to provide loans to various partnerships, of which
BLC's share was approximately $1.2 million. BLC's
share was funded by a loan from an affiliate of
71
Fortress. In May 2003, BLC purchased the remaining 55% interest
in GFB for net cash consideration of approximately
$10.5 million, which was funded by a loan from the
stockholders of FBA. See "Certain Relationships and Related
Party Transactions." During the first quarter of 2004, 14
of the limited partnerships sold the facilities that they owned
to Ventas and, in connection with such sales, certain
subsidiaries of BLC entered into and became the tenants under
leases with Ventas. For a more detailed description of the
Ventas transaction, see "— Leases —
Ventas Lease Arrangement with BLC."
BLC completed an initial public offering of its common stock in
May 1997. BLC remained a public company until September 2000,
when it was acquired pursuant to a tender offer by FBA, a joint
venture owned by an affiliate of Fortress and an affiliate of
Capital Z Partners.
Acquisition and History of Alterra Healthcare
Corporation
In                     2005,
a wholly-owned subsidiary of ours merged with and into FEBC-ALT
Investors, resulting in the issuance of an aggregate of
29,750,000 shares of our common stock for all of the
outstanding membership interests of FEBC-ALT Investors. Alterra
is an indirect wholly-owned subsidiary of FEBC-ALT Investors
and, as a result of this transaction, Alterra became our
indirect wholly-owned subsidiary. FIT-ALT Investor, Fortress
Investment Trust II, Emeritus and NW Select (each a former
member of FEBC-ALT Investors) each became significant
stockholders of ours. Each of FIT-ALT Investor LLC and Fortress
Investment Trust II is an affiliate of Fortress. Each of
Emeritus and NW Select is selling all of its shares in this
offering. See "Principal and Selling Stockholders" and
"Certain Relationships and Related Party Transactions."
In June and July 2005, FIT REN, an affiliate of Fortress,
purchased eight senior living facilities and one senior living
facility, respectively, consisting of 1,261 units, or the
Prudential Portfolio, from affiliates of Prudential Financial,
Inc. for an aggregate purchase price of approximately
$282.4 million, before closing costs. Prior to our
acquisition of Alterra, Alterra purchased from Fortress
Investment Trust II, an affiliate of Fortress, all of the
outstanding membership interests in FIT REN for an aggregate
purchase price of approximately $282.4 million (including
the assumption of approximately $171.0 million of debt). As
a result of the purchase, FIT REN became a wholly-owned
subsidiary of Alterra and Fortress Investment Trust II
became a member of FEBC-ALT Investors. In connection with the
FEBC-ALT Investors merger described above, Fortress Investment
Trust II received 11,750,000 shares of our common
stock, and became a significant stockholder of ours. See
"Principal and Selling Stockholders" and "Certain
Relationships and Related Party Transactions." Subsidiaries
of BLC operate each of the facilities in the Prudential
Portfolio pursuant to management agreements with the property
owners. See "— Acquisition and History of
Brookdale Living Communities, Inc."
In June 2005, FIT-ALT Investor, an affiliate of Fortress,
purchased membership interests representing an approximately 25%
membership interest in FEBC-ALT Investors from Emeritus and NW
Select, for an aggregate purchase price of $50.0 million.
In connection with this transaction, FEBC-ALT Investors paid a
dividend of $20.0 million to FIT-ALT Investor, its sole
Class A Preferred stockholder. FIT-ALT Investor used the
proceeds of the dividend to pay a portion of the purchase price.
See "Certain Relationships and Related Party
Transactions" for a more detailed description of this
transaction.
During the fourth quarter of 2004, Provident acquired 47
assisted living facilities from Alterra through the acquisition
of 100% of the outstanding capital stock of certain Alterra
subsidiaries for a total purchase price of approximately
$240.4 million (including the assumption of approximately
$49.5 million of non-recourse and limited recourse
property-level debt). Alterra currently leases and operates all
of the facilities that it sold to Provident pursuant to
long-term operating leases. See
"— Leases — Provident's Master
Lease Arrangements with Alterra." In October 2004, Alterra
paid a dividend of $50.0 million to FIT-ALT Investor, its
sole Class A Preferred stockholder, which represented a
partial return of capital, and included repayment of
approximately $17.2 million of debt
72
owed to Fortress, including accrued interest. The dividend was
funded with a portion of the proceeds received from the
Provident transaction.
In December 2004, AHC Purchaser Inc., a wholly-owned subsidiary
of Alterra, and Merrill Lynch Capital entered into a series of
agreements through which Alterra borrowed $72.5 million to
refinance two other debt arrangements. The financing is secured
by 21 facilities with a capacity for 860 residents. See
"Description of Indebtedness — Merrill Lynch
Mortgage Loan."
In February 2003, ALS-Venture II, Inc., a now inactive
subsidiary of Alterra, and Wynwood of Chapel Hill, LLC, sold 25
assisted living properties pursuant to a Purchase and Sale
Agreement to SNH ALT Leased Properties Trust, or SNH, for
approximately $61.0 million. Subsequently, AHC Trailside,
Inc., a subsidiary of Alterra, entered into and became the
tenant at these 25 assisted living facilities pursuant to a
lease with SNH. "See — Leases —
SNH's Sale-Leaseback Arrangement with Alterra."
Alterra completed an initial public offering of its common stock
in August 1996 and remained a public company until 2003. In
January 2003, in order to facilitate and complete its ongoing
restructuring initiatives, Alterra filed a voluntary petition
for bankruptcy under Chapter 11 of the U.S. Bankruptcy
Code. Alterra emerged from bankruptcy in December 2003 when it
was acquired and recapitalized by FEBC-ALT Investors, a joint
venture that included an affiliate of Fortress. Since 2001, in
connection with its bankruptcy and reorganization efforts,
Alterra has sold more than 200 facilities and parcels of land to
third parties for in excess of $150.0 million.
In December 2002, individual leases on 35 facilities that were
previously leased by Alterra from LTC Properties, Inc., or LTC,
and its affiliates were either terminated or amended and
restated, and Alterra entered into four separate master leases
with LTC and its affiliates with respect to the facilities. See
"— Leases — LTC's Master Lease
Arrangement with Alterra."
In April 2002, 43 facilities with a capacity for 1,526 residents
that were previously leased by affiliates of Alterra from
affiliates of Meditrust (La Quinta Properties, Inc.), or
Meditrust, were conveyed by Meditrust to JER/ NHP Senior Living
Texas, L.P., JER/ NHP Senior Living Wisconsin, LLC, JER/ NHP
Senior Living Kansas, Inc., and JER/ NHP Senior Living
Acquisition, LLC, collectively, JER I. The Meditrust-Alterra
leases were terminated and the Alterra affiliates entered into a
single master lease with JER I with respect to those
facilities. In October 2002, three additional facilities that
were previously mortgaged to Key Bank and six facilities that
were previously mortgaged to Washington Mutual were conveyed by
affiliates of Alterra to JER/ NHP Senior Living Acquisition,
LLC, or JER II. Simultaneous with the conveyances,
affiliates of JER II leased these residences to ALS
Leasing, Inc., a wholly-owned subsidiary of Alterra, under a
single master lease. See "— Leases —
JER I's Master Lease Arrangement with Alterra"
and "— Leases — JER II's
Master Lease Arrangement with Alterra."
In April 2002, Alterra entered into a single master lease with
Nationwide Health Properties, Inc., or NHP, and its affiliates
with respect to 57 facilities, which included six facilities
that were previously leased by Alterra from Meditrust. Of the
original NHP-Alterra portfolio, six additional facilities were
not included in the master lease due to underlying ground leases
or bond-related indebtedness, and Alterra is obligated to amend
the master lease to add these facilities when consents are
obtained. One of the six facilities was added to the master
lease in June 2005. Since the time of entry into the master
lease, six facilities have been sold. As a result, 52 facilities
remain under the master lease. See
"— Leases — NHP's Master Lease
Arrangement with Alterra."
In July 2001, individual leases on 38 residences that were
previously leased by Alterra from Health Care REIT, Inc., or
HCR, and its affiliates were terminated, and Alterra entered
into a single master lease with HCR and its affiliates with
respect to 36 of the residences. In subsequent amendments, ten
additional properties with a capacity for 424 residents were
refinanced out of unaffiliated lender/lessor portfolios and
added to the master lease, and one property originally included
in the master lease was sold and removed from the master lease.
As a result, Alterra currently leases 45 facilities from HCR and
its affiliates under the master lease. See
"— Leases — Health Care REIT's
Master Lease Arrangement with Alterra."
73
During 2001, Alterra negotiated a series of agreements that
resulted in the discontinuation of joint venture arrangements
with respect to 42 residences. In October 2001, Alterra
negotiated the buyout of a joint venture partner's interest
in 15 residences in connection with a modification and
settlement agreement with one investor group. In December 2001,
Alterra terminated its joint venture with Pioneer Development
Company, or Pioneer, by exchanging ownership interests in 12
joint venture entities jointly owned with this group, resulting
in Alterra and Pioneer each acquiring sole ownership in six of
these residences. Also in December 2001, Alterra terminated its
development joint venture with Manor Care, Inc. relating to 13
residences in connection with consummating a global settlement
of various pending claims between Alterra and Manor Care and its
affiliates.
Acquisition and History of Fortress CCRC Portfolio
In                     2005,
a wholly-owned subsidiary of ours merged with and into Fortress
CCRC resulting in the issuance of an aggregate of
8,250,000 shares of our common stock for all of the
outstanding membership interests of Fortress CCRC. As a result
of this transaction, Fortress CCRC became our wholly-owned
subsidiary and Fortress Investment Trust II, the former
sole member of Fortress CCRC, received shares of our common
stock and became a significant stockholder of ours. See
"Principal and Selling Stockholders" and "Certain
Relationships and Related Party Transactions."
The NBA is a 501(c)(3) not-for-profit organization founded in
1887. As a result of deteriorating operating performance and
unsuccessful negotiations to restructure the NBA's debt and
management, bonds issued by the NBA were trading at a discount
to their par value. Between January and February 2004, FIT CCRC
LLC, an affiliate of Fortress, acquired the NBA debt and helped
form the unsecured creditors' committee to lead a
restructuring of the NBA. In February 2004, the NBA elected to
file for bankruptcy protection. In September 2004, Fortress CCRC
negotiated an asset purchase agreement to acquire 11 CCRC
facilities consisting of 4,053 units/beds (including
825 resident-owned cottages or our CCRC campuses managed by
us) across ten states from the NBA as debtor in possession under
Chapter 11 of the U.S. bankruptcy code. Fortress CCRC
was subsequently selected as the winning bidder through a
bankruptcy auction in December 2004. In April and May 2005,
Fortress CCRC purchased 11 of the facilities consisting of
4,053 units/beds (including 825 resident-owned cottages or
our CCRC campuses managed by us) from the NBA for an aggregate
purchase price of approximately $211.7 million, before
closing costs. Three of these facilities were sold by Fortress
CCRC to other purchasers for $30.3 million simultaneously
with or shortly after their purchase. Of the eight facilities
that remained, Fortress CCRC sold one on July 1, 2005 for
$2.5 million and one is currently under contract for sale.
It is our intention to retain ownership of six of these
facilities and manage the one facility that we recently sold. We
refer to these six facilities in this prospectus as the
"Fortress CCRC Portfolio." We plan to utilize
BLC's operating expertise to improve the Fortress CCRC
Portfolio, which we believe has been severely under-managed as a
result of significant turmoil at the NBA prior to and during the
bankruptcy process.
Operations
Our Product Offerings
We offer a variety of senior living housing and service
alternatives in over 380 facilities located across the United
States. Our primary product offerings consist mainly of
(i) Independent Living Facilities, (ii) Assisted
Living Facilities, (iii) Memory Care Facilities, and
(iv) CCRCs. Following is a description of each:
•
Independent Living Facilities
Our Independent Living Facilities are primarily designed for
middle to upper income senior citizens age 70 and older who
desire an upscale residential environment providing the highest
quality of service.
74
The majority of our Independent Living Facilities consist of
both independent living and assisted living units in a single
facility, which allows residents to "age-in-place" by
providing them with a continuum of senior independent and
assisted living services. While the number varies depending upon
the particular facility, 85% of all of the units at our
Independent Living Facilities are independent living units (of
our facilities with both independent and assisted living units,
approximately 76% of the total units are designated as
independent living units), with a smaller number of units
licensed for assisted living.
Our Independent Living Facilities are large multi-story
buildings containing from 74 to 341 units. Residents may
choose from studio, one-bedroom and two-bedroom units, depending
upon the specific facility.
Each Independent Living Facility provides residents with basic
services such as meal service, 24-hour emergency response,
housekeeping, concierge services, transportation and
recreational activities. Most of these facilities also offer
custom tailored supplemental care services at an additional
charge under the "Personally Yours" program, which may
include medication reminders, check-in services and escort and
companion services.
In addition to the basic services, our Independent Living
Facilities that include assisted living also provide residents
with supplemental care services options to provide assistance
with ADLs. The levels of care provided to residents vary from
facility to facility depending, among other things, upon the
licensing requirements of the state in which the facility is
located.
Residents in these facilities are able to maintain their
residency for an extended period of time due to the range of
service options available to residents (not including skilled
nursing) as their needs change. Residents with cognitive or
physical frailties and higher level service needs are
accommodated with supplemental services in their own units or,
in certain facilities, are cared for in a more structured and
supervised environment on a separate wing or floor. These
facilities also have a dedicated assisted living staff,
including nurses at the majority of facilities, and separate
assisted living dining rooms and activity areas.
Our Independent Living Facilities represent approximately 48.3%
of our total senior living capacity.
•
Assisted Living Facilities
Our Assisted Living Facilities offer housing and 24-hour
assistance with ADLs to mid-acuity frail and elderly residents.
Our Assisted Living Facilities include both freestanding,
multi-story facilities with more than 30 beds and smaller,
freestanding single story facilities with less than 30 beds.
Depending upon the specific location, the facility may include
(i) private studio, one-bedroom and one-bedroom deluxe
apartments, or (ii) individual rooms for one or two
residents in wings or "neighborhoods" scaled to a
single-family home, which includes a living room, dining room,
patio or enclosed porch, laundry room and personal care area, as
well as a caregiver work station.
All residents at these facilities receive the basic care level,
which includes ongoing health assessments, three meals per day
and snacks, coordination of special diets planned by a
registered dietitian, assistance with coordination of physician
care, social and recreational activities, housekeeping and
personal laundry services. In some locations we offer our
residents exercise programs and programs designed to address
issues associated with early stages of Alzheimer's and
other forms of dementia. In addition, we offer higher levels of
personal care services to residents at these facilities that are
very physically frail or experiencing early stages of
Alzheimer's disease or other dementia and who require more
frequent or intensive physical assistance or increased personal
care and supervision due to cognitive impairments. For example,
physically frail residents may require medication management,
two-person transfer from a wheelchair or incontinence care.
These additional services, which we offer for an additional
cost, are part of our "YourCare" program.
75
Our Assisted Living Facilities represent approximately 30.5% of
our senior living capacity.
•
Memory Care Facilities
Our Memory Care Facilities are specially designed freestanding
facilities for residents with Alzheimer's disease and other
dementias requiring the attention, personal care and services
needed to help cognitively impaired residents maintain a higher
quality of life.
Our Memory Care Facilities have from 20 to 60 beds and some are
part of a campus setting, which includes a free-standing
assisted living facility.
As a result of their progressive decline in cognitive abilities,
including impaired memory, thinking and behavior, residents at
these facilities typically require higher levels of personal
care and services. In addition, residents require increased
supervision because they are typically highly confused, wander
prone and incontinent. Specialized services include assistance
with ADLs, behavior management and an activities program, the
goal of which is to provide a normalized environment that
supports residents' remaining functional abilities.
Whenever possible, residents participate in all facets of daily
life at the residence, such as assisting with meals, laundry and
housekeeping.
Our Memory Care Facilities represent approximately 10.2% of our
senior living capacity.
•
CCRCs
Our CCRCs offer a variety of living arrangements and services to
accommodate all levels of physical ability and health. Most of
our CCRCs have independent living, assisted living and skilled
nursing available on one campus, and some also include memory
care and Alzheimer's units. In addition, four of our CCRC
facilities also contain single-family homes that are owned by
the resident, who pays a monthly maintenance charge to the
community for various maintenance services.
Some of our CCRCs require the residents in the independent
living apartment units to pay a one-time upfront entrance fee,
which fee is partially refundable upon the subsequent sale of
the unit or, in certain cases, upon the sale of a comparable
unit.
In addition, we have one skilled nursing facility —
Westbury Care Center — that is not part of a CCRC.
Our CCRCs represent approximately 10.7% of our total senior
living capacity. Our single skilled nursing facility represents
approximately 0.3% of our total senior living capacity.
Operations Overview
We continually review opportunities to expand the amount of
services we provide to our residents. To date, we have been able
to increase our monthly resident fees on an annual basis and
generally have experienced increasing facility operating margins
through a combination of the implementation of efficient
operating procedures and the economies of scale associated with
the size and number of our facilities. Our operating procedures
include securing national vendor contracts to obtain consistent
low pricing for certain services such as food, energy and
insurance, implementing strict budgeting and financial controls
at each facility, and establishing standardized training and
operations procedures. We believe that successful senior living
operators must effectively combine the business disciplines of
housing, hospitality, health care, marketing, finance and real
estate expertise.
We have implemented intensive standards, policies and procedures
and systems, including detailed staff manuals, which we believe
have contributed to our facility operating margins. We have
centralized accounting controls, finance and other operating
functions at our corporate headquarters so that, consistent with
our operating philosophy, facility-based personnel can focus on
resident care and efficient operations. Headquarters staff in
Chicago, Illinois and our staff at the operations support center
in Milwaukee, Wisconsin are responsible for the establishment of
company-wide policies and procedures relating to, among other
things, resident care; facility design and facility
76
operations; billings and collections; accounts payable; finance
and accounting; risk management; development of employee
training materials and programs; marketing activities; the
hiring and training of management and other facility-based
personnel; compliance with applicable local and state regulatory
requirements; and implementation of our acquisition, development
and leasing plans.
Consolidated Corporate Operations Support
We have developed a centralized infrastructure and services
platform, which provides us with a significant operational
advantage over local and regional operators of senior living
facilities. The size of our business also allows us to achieve
increased efficiencies with respect to various corporate
functions such as human resources, finance, accounting, legal,
information technology and marketing. We are also able to
realize cost efficiencies in the purchasing of food, supplies,
insurance, benefits, and other goods and services. In addition,
we have established an operations group to support all of our
product lines and facilities in areas such as training,
regulatory affairs, asset management, dining and procurement.
Facility Staffing and Training
Each facility has an Executive Director or Residence Director,
each a Director, responsible for the overall day-to-day
operations of the facility, including quality of care, social
services and financial performance. Each Director receives
specialized training from us. In addition, a portion of each
Director's compensation is directly tied to the operating
performance of the facility and to the maintenance of high
occupancy levels. We believe that the quality of our facilities,
coupled with our competitive compensation philosophy, have
enabled us to attract high-quality, professional Directors.
Depending upon the size of the facility, each Director is
supported by a facility staff member who is directly responsible
for day-to-day care of the residents and either facility staff
or regional support to oversee the facility's marketing and
community outreach programs. Other key positions supporting each
facility may include individuals responsible for food service,
activities, housekeeping, and engineering.
We believe that quality of care and operating efficiency can be
maximized by direct resident and staff contact. Employees
involved in resident care, including the administrative staff,
are trained in the support and care needs of the residents and
emergency response techniques. We have adopted formal training
and evaluation procedures to help ensure quality care for our
residents. We have extensive policy and procedure manuals and
hold frequent training sessions for management and staff at each
site.
Quality Assurance
We maintain quality assurance programs at each of our facilities
through our corporate headquarters' staff. Our quality
assurance program is designed to achieve a high degree of
resident and family member satisfaction with the care and
services that we provide. Our quality control measures include,
among other things, facility inspections conducted by corporate
staff on a regular basis. These inspections cover the appearance
of the exterior and grounds; the appearance and cleanliness of
the interior; the professionalism and friendliness of staff;
resident care; the quality of activities and the dining program;
observance of residents in their daily living activities; and
compliance with government regulations. Our quality control
measures also include the survey of residents and family members
on a regular basis to monitor their perception of the quality of
services provided to residents.
In order to foster a sense of community as well as to respond to
residents' desires, at our facilities, we have established
a resident council or other resident advisory committee that
meets monthly with the Director of the facility. Separate
resident committees also exist at many of these facilities for
food service, activities, marketing and hospitality. These
committees promote resident involvement and satisfaction and
enable facility management to be more responsive to the
residents' needs and desires.
77
Marketing and Sales
Our marketing strategy is intended to create awareness of us,
our facilities, our products and our services among potential
residents and their family members and among referral sources,
including hospital discharge planners, physicians, clergy, area
agencies for the elderly, skilled nursing facilities, home
health agencies and social workers. Our marketing staff develops
overall strategies for promoting our facilities and monitors the
success of our marketing efforts, including outreach programs.
In addition to direct contacts with prospective referral
sources, we also rely on print advertising, yellow pages
advertising, direct mail, signage and special events, health
fairs and community receptions. Resident referral programs have
also been established and are promoted at many facilities.
Facilities
We operate over 380 facilities across 32 states, with the
capacity to serve over 30,000 residents. Of the facilities we
currently operate, we own 58, we lease 307 pursuant to operating
and capital leases and 16 are owned by third parties.
The following table sets forth certain information regarding our
facilities, excluding assets held for sale:
Occupancy
at 6/30/05
Ownership Status at June 30, 2005
State
Units/Beds
Occupancy
Leased
Owned
Managed
Total
Alabama
222
70.3
%
—
—
1
1
Arizona
661
88.5
%
8
—
1
9
California
2,031
89.2
%
3
9
—
12
Colorado
1,522
84.8
%
16
1
—
17
Connecticut
292
98.3
%
2
—
—
2
Florida
3,907
90.2
%
36
9
2
47
Georgia
280
98.6
%
1
—
—
1
Idaho
228
94.3
%
3
—
—
3
Illinois
2,306
93.1
%
9
2
—
11
Indiana
1,150
88.3
%
12
2
—
14
Iowa
139
89.2
%
—
1
—
1
Kansas
1,227
84.8
%
11
8
1
20
Maine
180
85.0
%
—
—
1
1
Massachusetts
282
98.6
%
1
—
—
1
Michigan
1,851
85.1
%
25
3
3
31
Minnesota
643
88.6
%
16
—
—
16
Missouri
948
85.2
%
1
2
—
3
Nevada
306
93.1
%
3
—
—
3
New Jersey
343
84.8
%
6
—
—
6
New Mexico
344
96.2
%
2
—
—
2
New York
1,196
92.2
%
10
6
—
16
North Carolina
743
91.7
%
12
1
—
13
Ohio
1,657
83.3
%
25
3
—
28
Oklahoma
1,557
81.2
%
27
1
2
30
Oregon
823
89.7
%
12
—
—
12
Pennsylvania
541
76.0
%
3
3
1
7
South Carolina
336
83.6
%
8
—
—
8
Tennessee
390
94.6
%
5
—
1
6
Texas
2,537
85.6
%
27
3
3
33
Virginia
353
99.2
%
2
—
—
2
Washington
864
91.0
%
8
2
—
10
Wisconsin
422
91.0
%
13
2
—
15
Total
30,281
88.1
%
307
58
16
381
78
The table below sets forth certain information regarding the top
15 facilities, by number of units, for BLC and Alterra, as well
as all of the properties in the Prudential Portfolio and the
Fortress CCRC Portfolio. In addition, we included certain
information for BLC's The Hallmark-Battery Park facility,
which is pictured on the inside cover of this prospectus.
Number of Units/Beds
Independent
Assisted
Memory
Skilled
Equity
Facility Name
Location
Living
Living
Care
Nursing
Homes
Total
Brookdale Living
    Communities
The Hallmark-Chicago
Chicago, IL
341
—
—
—
—
341
The Hallmark-Battery Park
New York, NY
197
20
—
—
—
217
The Devonshire of Lisle
Lisle, IL
296
25
—
—
—
321
Classic at West Palm Beach
West Palm Beach, FL
237
64
—
—
—
301
The Atrium of San Jose
San Jose, CA
291
—
—
—
—
291
River Bay Club
Quincy, MA
282
—
—
—
—
282
The Chambrel at Roswell
Roswell, GA
224
24
—
—
32
280
Grand Court Overland Park
Overland Park, KS
276
—
—
—
—
276
Woodside Terrace
Redwood City, CA
177
93
—
—
—
270
Chambrel at Island Lake
Longwood, FL
213
40
—
—
16
269
Kenwood of Lakeview
Chicago, IL
220
44
—
—
—
264
Devonshire of Hoffman Estates
Hoffman Estates, IL
228
34
—
—
—
262
Chambrel at Club Hill
Garland, TX
176
68
—
—
16
260
The Chambrel at Williamsburg
Williamsburg, VA
201
54
—
—
—
255
The Heritage of Des Plaines
Des Plaines, IL
226
29
—
—
—
255
Meadows of Glen Ellyn
Glen Ellyn, IL
190
44
—
—
—
234
Alterra
Wynwood & Villas at
    Canterbury Gardens
Aurora, CO
153
65
—
—
—
218
Wynwood of Columbia Edgewater
Richland, WA
—
128
—
—
—
128
Villas at Union Park
Tacoma, WA
119
—
—
—
—
119
Wynwood of Kenmore
Kenmore, NY
—
113
—
—
—
113
Wynwood of Northampton Manor
Richboro, PA
—
113
—
—
—
113
Wynwood of Niskayuna
Niskayuna, NY
—
100
—
—
—
100
Wynwood of Rogue Valley
Medford, OR
—
95
—
—
—
95
Villas of Sparks
Sparks, NV
90
—
—
—
—
90
Wynwood of Forest Grove
Forest Grove, OR
—
88
—
—
—
88
Villas of McMinnville
McMinnville, OR
87
—
—
—
—
87
Villas of Sherman Brook
Clinton, NY
84
—
—
—
—
84
Villas of Summerfield Village
Syracuse, NY
84
—
—
—
—
84
Villas at the Atrium
Boulder, CO
82
—
—
—
—
82
Wynwood of River Place
Boise, ID
—
80
—
—
—
80
Wynwood of Manlius
Manlius, NY
—
80
—
—
—
80
Prudential Portfolio
Lodge at Paulin Creek
Santa Rosa, CA
250
—
—
—
—
250
Oak Tree Villa
Scotts Valley, CA
126
70
—
—
—
196
Pacific Inn
Torrance, CA
134
—
—
—
—
134
Inn at the Park
Irvine, CA
70
64
—
—
—
134
Nohl Ranch Inn
Anaheim Hills, CA
85
42
—
—
—
127
Mirage Inn
Rancho Mirage, CA
94
31
—
—
—
125
Ocean House
Santa Monica, CA
50
67
—
—
—
117
The Lexington
Ventura, CA
56
58
—
—
—
114
The Gables
Monrovia, CA
41
23
—
—
—
64
Fortress CCRC
    Portfolio
Cypress Village
Jacksonville, FL
364
39
60
60
292
815
Foxwood Springs
Raymore, MO
141
62
50
58
246
557
Village at Skyline
Colorado Springs, CO
347
86
13
57
59
562
Robin Run Village
Indianapolis, IN
199
—
24
60
228
511
Patriot Heights
San Antonio, TX
162
10
—
60
—
232
Ramsey Home/Ramsey Village
Des Moines, IA
10
51
24
54
—
139
79
In addition, on July 1, 2005, Fortress CCRC sold
Heatherwood Village, a 189 unit-facility located in Newton,
Kansas, which a subsidiary of BLC will continue to manage
pursuant to a management agreement with the new owner. Fortress
CCRC also owns Heritage Crossing, a 233-unit facility located in
Edmond, Oklahoma, which is currently under contract for sale.
Corporate Offices
Our main corporate offices are all leased, including our
30,314 square foot corporate headquarters facility in
Chicago, Illinois, and our 44,222 square foot operations
support center in Milwaukee, Wisconsin.
Competition
The senior living industry is highly competitive. We compete
with numerous other companies that provide similar senior living
alternatives, such as home health care agencies, community-based
service programs, retirement communities, convalescent centers
and other senior living providers. In general, regulatory and
other barriers to competitive entry in the independent living
and assisted living segments of the senior living industry are
not substantial, except in the skilled nursing segment. Although
new construction of senior living communities has declined, we
have experienced and expect to continue to experience
competition in our efforts to acquire and operate senior living
facilities. Some of our present and potential senior living
competitors have, or may obtain, greater financial resources
than us and may have a lower cost of capital. Consequently, we
may encounter competition that could limit our ability to
attract residents or expand our business, which could have a
material adverse effect on our revenues and earnings. Our major
competitors are Sunrise Senior Living, Inc., Colson &
Colson/ Holiday Retirement Corp., American Retirement
Corporation, Professional Community Management Life Care
Services, LLC and Atria Senior Living Group.
Customers
Our target independent living residents are senior citizens
age 70 and older who desire or need a more supportive
living environment. The average independent living resident
resides in an independent living facility for 30 months. A
number of our independent living residents relocate to one of
our facilities in order to be in a metropolitan area that is
closer to their adult children.
Our target assisted living residents are predominantly female
senior citizens age 85 and older who require daily
assistance with two or three ADLs. The average assisted living
resident resides in an assisted living facility for
21 months. Residents typically enter an assisted living
facility due to a relatively immediate need for services that
might have been triggered by a medical event or need.
We believe our combination of independent and assisted living
operating expertise and the broad base of customers that this
enables us to target creates a unique opportunity for us to
invest in a broad spectrum of assets in the senior living
industry.
Our Employees
As of March 31, 2005 we had approximately
10,500 full-time employees, of which 139 work in our
Chicago headquarters office and 153 work in our Milwaukee
operations support center. Five of our employees are unionized.
We currently consider our relationship with our employees to be
good.
Government Regulation
The regulatory environment surrounding the senior living
industry continues to intensify in the amount and type of laws
and regulations affecting it. In addition, federal, state and
local officials are increasingly focusing their efforts on
enforcement of these laws. This is particularly true for large
for-profit, multi-facility providers like us. Some of the laws
and regulations that impact our industry include: state and
local laws impacting licensure, protecting consumers against
deceptive practices,
80
and generally affecting the facilities' management of
property and equipment and how we otherwise conduct our
operations, such as fire, health and safety laws and regulations
and privacy laws, federal and state laws designed to protect
Medicare and Medicaid, which mandate what are allowable costs,
pricing, quality of services, quality of care, food service,
resident rights (including abuse and neglect) and fraud; federal
and state residents' rights statutes and regulations;
federal and state laws as to referral payments and
self-referrals, and Anti-Kickback and physicians self-referral
("Stark") laws; and safety and health standards set by
the Occupational Safety and Health Administration. We are unable
to predict the future course of federal, state and local
legislation or regulation. Changes in the regulatory framework
could have a material adverse effect on our business.
Many senior living facilities are also subject to regulation and
licensing by state and local health and social service agencies
and other regulatory authorities. Although requirements vary
from state to state, these requirements generally address:
personnel education, training and records; facility services,
including administration of medication, assistance with
self-administration of medication and the provision of nursing
services; staffing levels; monitoring of resident wellness;
physical plant specifications; furnishing of resident units;
food and housekeeping services; emergency evacuation plans;
professional licensing and certification of staff prior to
beginning employment; and resident rights and responsibilities,
including in some states the right to receive health care
services from providers of a resident's choice that are not
our employees. In several of the states in which we operate or
may operate, we are prohibited from providing certain higher
levels of senior care services without first obtaining the
appropriate licenses. In addition, in several of the states in
which we operate or intend to operate, assisted living
facilities and skilled nursing facilities require a certificate
of need before the facility can be opened or the services at an
existing facility can be expanded. In most states, senior living
facilities also are subject to state or local building, zoning,
fire and food service codes and must be in compliance with these
local codes before licensing or certification may be granted.
These laws and regulatory requirements could affect our ability
to expand into new markets and to expand our services and
facilities in existing markets. In addition, if any of our
presently licensed facilities operates outside of its licensing
authority, it may be subject to penalties, including closure of
the facility.
The intensified regulatory and enforcement environment impacts
providers like us because of the increase in the number of
inspections or surveys by governmental authorities and
consequent citations for failure to comply with regulatory
requirements. Unannounced surveys or inspections may occur
annually or bi-annually, or following a state's receipt of
a complaint about the facility. From time to time in the
ordinary course of business, we receive deficiency reports from
state regulatory bodies resulting from such inspections or
surveys. Most inspection deficiencies are resolved through an
agreed-to plan of corrective action relating to the
facility's operations, but the reviewing agency typically
has the authority to take further action against a licensed or
certified facility, which could result in the imposition of
fines, imposition of a provisional or conditional license,
suspension or revocation of a license, suspension or denial of
admissions, loss of certification as a provider under federal
health care programs or imposition of other sanctions, including
criminal penalties. Loss, suspension or modification of a
license may also cause us to default under our leases and/or
trigger cross-defaults. Sanctions are taken against providers or
facilities without regard to the providers' or
facilities' history of compliance. We may also expend
considerable resources to respond to federal and state
investigations or other enforcement action under applicable laws
or regulations. To date, none of the deficiency reports received
by us has resulted in a suspension, fine or other disposition
that has had a material adverse effect on our revenues. However,
any future substantial failure to comply with any applicable
legal and regulatory requirements could result in a material
adverse effect to our business as a whole. In addition, state
Attorney Generals vigorously enforce consumer protection laws as
those laws relate to the senior living industry. State Medicaid
Fraud and Abuse Units investigate assisted living facilities
even if the facility or any of its residents do not receive
federal or state funds.
81
Regulation of the senior living industry is evolving because of
the growing interests of a variety of advocacy organizations and
political movements attempting to standardize regulations for
certain segments of the industry, specifically assisted living.
Our operations could suffer if future regulatory developments,
such as federal assisted living laws and regulations, as well as
mandatory increases in the scope and severity of deficiencies
determined by survey or inspection officials, increase the
number of citations that can result in civil or criminal
penalties. Current laws and regulations allow enforcement
officials to make determinations on whether the care provided by
one or more of our facilities exceeds the level of care for
which the facility is licensed. A facility found delivering care
beyond its license might result in the immediate transfer and
discharge of residents, which creates market instability for a
provider having several facilities in the region. Furthermore,
many state regulations allow citations in one facility to impact
other facilities in the state in the effort to
"control" the big for-profit providers. Revocation of
a license at a given facility could therefore impact our ability
to obtain new licenses or to renew existing licenses at other
facilities, which may also cause us to be in default under our
leases and trigger cross-defaults or may also trigger defaults
under certain of our credit agreements, or adversely affect our
ability to obtain financing in the future. If a state were to
find that one facility's citation will impact another of
our facilities, this will also increase costs and result in
increased surveillance by the state survey agency. If regulatory
requirements increase, whether through enactment of new laws or
regulations or changes in the enforcement of existing rules,
including increased enforcement brought about by advocacy
groups, in addition to federal and state regulators, our
operations could be adversely affected. In addition, any adverse
finding by survey and inspection officials may serve as the
basis for false claims lawsuits by private plaintiffs and may
lead to investigations under Anti-Kickback or Stark laws, which
may result in civil or criminal penalties against the facility
or individual.
There are various extremely complex federal and state laws
governing a wide array of referrals, relationships and
arrangements and prohibiting fraud by health care providers,
including those in the senior living industry, and governmental
agencies are devoting increasing attention and resources to such
anti-fraud initiatives. The Health Insurance Portability and
Accountability Act of 1996, or HIPAA, and the Balanced Budget
Act of 1997 expanded the penalties for health care fraud. In
addition, with respect to our participation in federal health
care reimbursement programs, the government or private
individuals acting on behalf of the government may bring an
action under the False Claims Act alleging that a health care
provider has defrauded the government and seek treble damages
for false claims and the payment of additional monetary civil
penalties. Recently, other health care providers have faced
enforcement action under the False Claims Act. The False Claims
Act allows a private individual with knowledge of fraud to bring
a claim on behalf of the federal government and earn a
percentage of the federal government's recovery. Because of
these incentives, so-called "whistleblower" suits have
become more frequent. Also, if any of our facilities exceeds its
level of care, we may be subject to private lawsuits alleging
"transfer trauma" by residents. Such allegations could
also lead to investigations by enforcement officials, which
could result in penalties, including the closure of facilities.
The violation of any of these regulations may result in the
imposition of fines or other penalties that could jeopardize our
business.
Additionally, in several states, we operate facilities that
participate in federal and/or state health care reimbursement
programs, including state Medicaid waiver programs for assisted
living facilities and the Medicare skilled nursing facility
benefit program, or other federal and/or state health care
programs. Consequently, we are subject to federal and state laws
that prohibit anyone from presenting, or causing to be
presented, claims for reimbursement which are false, fraudulent
or are for items or services that were not provided as claimed.
Violation of any of these laws can result in loss of licensure,
civil or criminal penalties and exclusion of health care
providers or suppliers from furnishing covered items or services
to beneficiaries of the applicable federal and/or state health
care reimbursement program. Loss of licensure may also cause us
to default under our leases and/or trigger cross-defaults.
Similar state laws vary from state to state, are sometimes vague
and have rarely been interpreted by courts or regulatory
agencies. We cannot be sure that these laws will be interpreted
consistently or in keeping with past practices.
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We are also subject to certain federal and state laws that
regulate financial arrangements by health care providers, such
as the Federal Anti-Kickback Law. This law makes it unlawful for
any person to offer or pay (or to solicit or receive) "any
remuneration ... directly or indirectly, overtly or covertly, in
cash or in kind" for referring or recommending for purchase
any item or service which is eligible for payment under the
Medicare and/or Medicaid programs. Authorities have interpreted
this statute very broadly to apply to many practices and
relationships between health care providers and sources of
patient referral. If a health care provider were to violate the
Anti-Kickback Law, it may face criminal penalties and civil
sanctions, including fines and possible exclusion from
government programs such as Medicare and Medicaid, which may
also cause us to default under our leases and/or trigger
cross-defaults. Adverse consequences may also result if we
violate federal Stark laws related to Medicare and Medicaid
physician self-referrals. While we endeavor to comply with all
laws that regulate the licensure and operation of our senior
living communities, it is difficult to predict how our revenues
could be affected if we were subject to an action alleging such
violations.
We are also subject to federal and state laws designed to
protect the confidentiality of patient health information. The
U.S. Department of Health and Human Services, or HHS, has
issued rules pursuant to HIPAA relating to the privacy of such
information. Rules that became effective April 14, 2003
govern our use and disclosure of health information at certain
HIPAA covered facilities. We established procedures to comply
with HIPAA privacy requirements at these facilities. The HIPAA
rule establishing administrative, physical and technical
security standards for health information became effective in
April 2005. To the best of our knowledge, we are in compliance
with this rule. Although both current and pending HIPAA
requirements affect the manner in which we handle health data
and communicate with payors at covered facilities, we believe
that the cost of compliance will not have a material adverse
effect on our business, financial condition or results of
operations.
Environmental Matters
Under various federal, state and local environmental laws, a
current or previous owner or operator of real property, such as
us, may be held liable in certain circumstances for the costs of
investigation, removal or remediation of certain hazardous or
toxic substances, including, among others, petroleum and
materials containing asbestos, that could be located on, in, at
or under a property, regardless of how such materials came to be
located there. Additionally, such an owner or operator of real
property may incur costs relating to the release of hazardous or
toxic substances, including government fines and payments for
personal injuries or damage to adjacent property. The cost of
any required investigation remediation, removal, mitigation,
compliance, fines or personal or property damages and our
liability therefore could exceed the property's value
and/or our assets' value. In addition, the presence of such
substances, or the failure to properly dispose of or remediate
the damage caused by such substances, may adversely affect our
ability to sell such property, to attract additional residents
and retain existing residents, to borrow using such property as
collateral or to develop or redevelop such property. In
addition, such laws impose liability for investigation,
remediation, removal and mitigation costs on persons who
disposed of or arranged for the disposal of hazardous substances
at third-party sites. Such laws and regulations often impose
liability without regard to whether the owner or operator knew
of, or was responsible for, the presence, release or disposal of
such substances as well as without regard to whether such
release or disposal was in compliance with law at the time it
occurred. Moreover, the imposition of such liability upon us
could be joint and several, which means we could be required to
pay for the cost of cleaning up contamination caused by others
who have become insolvent or otherwise judgment proof.
We do not believe that we have incurred such liabilities as
would have a material adverse effect on our business, financial
condition and results of operations.
Our operations are subject to regulation under various federal,
state and local environmental laws, including those relating to:
the handling, storage, transportation, treatment and disposal of
medical waste products generated at our facilities;
identification and warning of the presence of
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asbestos-containing materials in buildings, as well as removal
of such materials; the presence of other substances in the
indoor environment, and protection of the environment and
natural resources in connection with development or construction
of our properties.
Some of our facilities generate infectious or other hazardous
medical waste due to the illness or physical condition of the
residents, including, for example, blood-soaked bandages, swabs
and other medical waste products and incontinence products of
those residents diagnosed with an infectious disease. The
management of infectious medical waste, including its handling,
storage, transportation, treatment and disposal, is subject to
regulation under various federal, state and local environmental
laws. These environmental laws set forth the management
requirements for such waste, as well as related permit,
record-keeping, notice and reporting obligations. Each of our
facilities has an agreement with a waste management company for
the proper disposal of all infectious medical waste. The use of
such waste management companies does not immunize us from
alleged violations of such medical waste laws for operations for
which we are responsible even if carried out by such waste
management companies, nor does it immunize us from third-party
claims for the cost to cleanup disposal sites at which such
wastes have been disposed. Any finding that we are not in
compliance with environmental laws could adversely affect our
business operations and financial condition.
Federal regulations require building owners and those exercising
control over a building's management to identify and warn,
via signs and labels, their employees and certain other
employers operating in the building of potential hazards posed
by workplace exposure to installed asbestos-containing materials
and potential asbestos-containing materials in their buildings.
The regulations also set forth employee training, record-keeping
requirements and sampling protocols pertaining to
asbestos-containing materials and potential asbestos-containing
materials. Significant fines can be assessed for violation of
these regulations. Building owners and those exercising control
over a building's management may be subject to an increased
risk of personal injury lawsuits by workers and others exposed
to asbestos-containing materials and potential
asbestos-containing materials. The regulations may affect the
value of a building containing asbestos-containing materials and
potential asbestos-containing materials in which we have
invested. Federal, state and local laws and regulations also
govern the removal, encapsulation, disturbance, handling and/or
disposal of asbestos-containing materials and potential
asbestos-containing materials when such materials are in poor
condition or in the event of construction, remodeling,
renovation or demolition of a building. Such laws may impose
liability for improper handling or a release to the environment
of asbestos-containing materials and potential
asbestos-containing materials and may provide for fines to, and
for third parties to seek recovery from, owners or operators of
real properties for personal injury or improper work exposure
associated with asbestos-containing materials and potential
asbestos-containing materials.
The presence of mold, lead-based paint, contaminants in drinking
water, radon and/or other substances at any of the facilities we
own or may acquire may lead to the incurrence of costs for
remediation, mitigation or the implementation of an operations
and maintenance plan. Furthermore, the presence of mold,
lead-based paint, contaminants in drinking water, radon and/or
other substances at any of the facilities we own or may acquire
may present a risk that third parties will seek recovery from
the owners, operators or tenants of such properties for personal
injury or property damage. In some circumstances, areas affected
by mold may be unusable for periods of time for repairs, and
even after successful remediation, the known prior presence of
extensive mold could adversely affect the ability of a facility
to retain or attract residents and could adversely affect a
facility's market value.
We believe that we are in material compliance with applicable
environmental laws.
We are unable to predict the future course of federal, state and
local environmental regulation and legislation. Changes in the
environmental regulatory framework could have a material adverse
effect on our business. In addition, because environmental laws
vary from state to state, expansion
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of our operations to states where we do not currently operate
may subject us to additional restrictions on the manner in which
we operate our facilities.
Intellectual Property
Brookdale®, Hallmark®, Devonshire®,
Alterra®, Crossings®, Wynwood®, Clare
Bridge® and Clare Bridge Cottage® are registered
service marks of ours.
Legal Proceedings
We have been involved in litigation and claims incidental to the
conduct of our business comparable to other companies in the
senior living industry. Certain claims and lawsuits allege large
damage claims and may require significant legal costs to defend
and resolve. Similarly, our industry is always subject to
scrutiny by governmental regulators, which could result in
litigation related to regulatory compliance matters. As a
result, we maintain insurance policies in amounts and with the
coverage and deductibles we believe are adequate, based on the
nature and risks of our business, historical experience and
industry standards. We believe that the cost of defending any
pending or future litigation or challenging any pending or
future regulatory compliance matter will not have a material
adverse effect on our business.
Leases
Provident Sale-Leasebacks
In each of the following sale-leaseback transactions, Provident
entered into the relevant purchase agreement and master lease
agreement with certain of our affiliated entities in 2004. On
June 7, 2005, Ventas announced that it had completed the
acquisition of Provident pursuant to the terms of the Agreement
and Plan of Merger dated as of April 12, 2005, pursuant to
which Provident was merged with and into a wholly-owned
subsidiary of Ventas.
Alterra's Sale of the Alterra/Provident
Properties
In the fourth quarter of 2004, pursuant to a stock purchase
agreement, or the Alterra/Provident Purchase Agreement, entered
into in June 2004, as amended in October 2004, between Alterra
and Provident, Alterra sold to Provident 100% of the outstanding
capital stock of certain Alterra subsidiaries for an aggregate
purchase price of approximately $240.4 million, or the
Alterra/Provident Sale. Pursuant to the terms of the
Alterra/Provident Purchase Agreement, Alterra consummated the
Alterra/Provident Acquisition in two separate closings. The
Alterra subsidiaries owned a total of 47 assisted living
facilities, or the Alterra/Provident Properties, together in
each case with certain related personal property. Certain other
real and personal property owned by the Alterra subsidiaries and
all of the liabilities and obligations of the Alterra
subsidiaries other than certain liabilities relating to the
Alterra/Provident Properties that are not required to be
reflected or reserved on a balance sheet in accordance with GAAP
were transferred to or assumed by Alterra or a subsidiary of
Alterra prior to the completion of the Alterra/Provident Sale.
Alterra agreed to indemnify Provident for any losses it may
incur as a result of (a) any inaccuracy or breach of any
representation or warranty made by Alterra in the
Alterra/Provident Purchase Agreement, (b) any breach or
failure by Alterra to perform its obligations under the
Alterra/Provident Purchase Agreement, (c) any
Alterra/Provident Excluded Assets and Alterra/Provident Excluded
Liabilities, (d) certain environmental claims relating to
the Alterra/Provident Properties, (e) any third party
claims arising out of actions, omissions, events or facts
occurring on or prior to the closing of the Alterra/Provident
Sale relating to the assets, properties and business of Alterra,
and (f) certain fees and expenses of Alterra's
advisors. Alterra is not required to indemnify Provident for any
loss arising from matters set forth in clauses (a) and (e)
above, which does not exceed $25,000 and has no obligation to
indemnify Provident with respect to any losses until such losses
exceed $650,000 and in no event will Alterra be required to
indemnify Provident for losses in excess
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of $25.0 million that arise from those matters set forth in
clauses (a), (d) and (e) above. In addition, Alterra
is not required to indemnify Provident for breaches of
representations and warranties of which Provident's
officers obtained actual knowledge prior to the execution of the
Alterra/Provident Purchase Agreement. Alterra is also not
required to indemnify Provident for matters of which
Provident's officers obtained actual knowledge prior to the
closing of the Alterra/Provident Acquisition, unless on or
before such date Provident notified them of such matters and
Alterra agreed prior to such date that Provident was not
obligated to close the transactions contemplated by the
Alterra/Provident Purchase Agreement. Moreover, Alterra has
generally agreed to indemnify Provident against any tax
liability with respect to periods ending on or before, and
transactions occurring before, the Alterra/Provident Sale.
Provident has agreed to release the stockholders of Alterra and
their affiliates (other than Alterra and its subsidiaries) from
any claims or losses arising out of the transactions
contemplated by the Alterra/Provident Purchase Agreement.
Provident agreed to indemnify Alterra for any losses it may
incur as a result of (a) any inaccuracy or breach of any
representation or warranty made by it, (b) any breach or
failure by Provident to perform its obligations under the
Alterra/Provident Purchase Agreement and (c) any third
party claims as a result of any inspections of the
Alterra/Provident Properties performed by Provident. Provident
is not required to indemnify Alterra for any loss arising from
matters set forth in clauses (a) and (e) above, which does
not exceed $25,000 and Provident has no obligation to indemnify
Alterra with respect to any losses until such losses exceed
$650,000 and in no event will Provident be required to indemnify
for losses in excess of $25.0 million that arise from those
matters set forth in clauses (a) and (c) above.
Moreover, Provident has generally agreed to indemnify Alterra
against any tax liability (other than tax liability required to
be borne or paid by the Alterra/Provident Tenants (as defined
below) pursuant to the Alterra/Provident Property Leases (as
defined below)) with respect to periods beginning after, and
transactions occurring after, the closing of the
Alterra/Provident Sale.
Alterra paid all of the expenses incurred in connection with the
consummation of the Alterra/Provident Sale, including certain of
Provident's expenses. However, upon Alterra's request
and pursuant to the terms of the Alterra/Provident Purchase
Agreement, Provident funded these transaction expenses in the
aggregate amount of $3.5 million, which were contemplated
as part of the purchase price and lease basis upon which base
rent is calculated.
Provident's Master Lease Arrangements with
Alterra
Each of the Alterra/Provident Properties is owned by a
subsidiary of Provident, each an Alterra/Provident Landlord and
leased to a subsidiary of Alterra, each an Alterra/Provident
Tenant. Each Alterra/Provident Tenant entered into a master
sublease agreement with Alterra relating to the possession,
management and operation of each of the Alterra/Provident
Properties, or the Alterra/Provident Sublease Agreements.
Concurrently with the consummation of the Alterra/Provident
Sale, subsidiaries and/or affiliates of Alterra entered into
master lease arrangements with Provident, which include
(a) two master lease agreements covering the
Alterra/Provident Properties, each an Alterra/Provident Property
Lease, (b) an agreement regarding leases, or the
Alterra/Provident Agreement Regarding Leases, entered into
between the parent company of the Alterra/Provident Tenants or
ALS Holdings and the parent company of each of the owners
of the Alterra/Provident Properties, or PSLT-ALS Holdings,
(c) a lease guaranty by ALS Holdings with respect to
each Alterra/Provident Property Lease, and (d) a guaranty
of the Alterra/Provident Agreement Regarding Leases by Alterra.
Each Alterra/Provident Property Lease is for an initial term of
15 years, with two five-year renewal options at
Alterra's election, provided that, among other things,
(i) no event of default exists under any Alterra/Provident
Property Lease or under the Alterra/Provident Agreement
Regarding Leases and (ii) no management termination event
(as defined in the Alterra/Provident Agreement Regarding Leases)
has occurred and is continuing beyond any applicable cure
period. Pursuant to
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the Alterra/Provident Agreement Regarding Leases, the renewal
option may only be exercised with respect to all of the
Alterra/Provident Properties.
Under the terms of the Alterra/Provident Property Leases, the
Alterra/Provident Tenants are obligated to pay base rent in an
amount equal to the Alterra/Provident Lease Rate (as defined
below) multiplied by the sum of the purchase price (including
certain transaction costs incurred in connection with the
Alterra/Provident Sale which, at Alterra's election,
Provident actually paid (including financing costs and debt
assumption fees) in the amount of $3.5 million) plus any
subsequent amounts Provident funds in connection with capital
improvements as described in each Alterra/Provident Property
Lease and the Alterra/Provident Agreement Regarding Leases, such
sum, the Alterra/Provident Lease Basis.
The initial lease rate for the first year of each of the
Alterra/Provident Property Leases is 9.625%, as the same may be
escalated, the Alterra/Provident Lease Rate. Commencing on
November 1, 2005 and January 1, 2006, respectively,
for each of the Alterra/Provident Leases, and annually
thereafter, the Alterra/Provident Lease Rate will be increased
by an amount equal to the lesser of (i) four times the
percentage increase in the Consumer Price Index during the
immediately preceding year or (ii) 2.5%, or the
Alterra/Provident Annual Increase. During the first year of each
renewal term of the Alterra/Provident Property Leases, the
Alterra/Provident Lease Basis will be adjusted to equal the
greater of (i) the then current fair market value of the
Alterra/Provident Properties as increased by amounts delivered
by the Alterra/Provident Landlord to the Alterra/Provident
Tenant for capital expenditures (as determined by mutual
agreement, or if no such agreement is reached, by an acceptable
appraisal method) or (ii) the Alterra/Provident Lease Basis
for the immediately preceding calendar month. Rent under the
Alterra/Provident Property Leases will continue to be escalated
in accordance with the Alterra/Provident Annual Increase during
each renewal term. Rent under the Alterra/Provident Property
Leases is paid in arrears on a monthly basis.
The Alterra/Provident Property Leases include representations,
warranties and covenants customary for sale-leaseback
transactions. Lease payments are absolute triple-net, with the
Alterra/Provident Tenants responsible for the payment of all
taxes, assessments, utility expenses, insurance premiums and
other expenses relating to the operation of the
Alterra/Provident Properties. In addition, the Alterra/Provident
Tenants are required to comply with the terms of the mortgage
financing documents encumbering the Alterra/Provident
Properties, if and to the extent that, among other things, the
terms of such mortgage financings are commercially reasonable
and consistent with other mortgage financings of comparable
properties in the then current market.
Provident may, in Provident's sole discretion, upon the
request of any Alterra/Provident Tenant, fund additional
necessary capital improvements to the properties. If Provident
funds any such amounts, the Alterra/Provident Lease Basis shall
be increased on a dollar-for-dollar basis for the amounts
Provident funds. In addition, if PSLT-ALS Holdings, ALS Holdings
and Alterra mutually determine that there is an extraordinary
capital expenditure requirement at one or more of the
Alterra/Provident Properties, or if PSLT-ALS Holdings and ALS
Holdings mutually agree that a capital improvement at one or
more of the Alterra/Provident Properties is necessary for the
applicable Alterra/Provident Property to be in compliance with
legal requirements, PSLT-ALS Holdings agreed to fund up to
$5 million in the aggregate over the term of the
Alterra/Provident Property Leases with respect to all of the
Alterra/Provident Properties and the amount that Provident funds
will be added to the Alterra/Provident Lease Basis. The
Alterra/Provident Tenants have covenanted to keep the
Alterra/Provident Properties in good condition and repair.
The Alterra/Provident Property Leases also require the
Alterra/Provident Tenants to spend on capital expenditures and
improvements, in the aggregate among the Alterra/Provident
Properties, at least $400 per unit per year, or the
Alterra/Provident Capital Improvement Amount, which amount will
be increased annually by the percentage increase in the Consumer
Price Index. If in any year the Alterra/Provident Tenants do not
expend the entire Alterra/Provident Capital Improvement Amount,
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the unspent portion of such funds will be deposited into an
escrow account with Provident or with Provident's mortgage
lender, which funds will be available for property capital
expenditures and capital improvements; provided that such funds
will not be made available to the Alterra/Provident Tenants
until such time as the Alterra/Provident Tenants have expended
the Alterra/Provident Capital Improvement Amount, in the
aggregate, in such year. In addition, Provident has the right to
require reserve funding of the Alterra/Provident Capital
Improvement Amount upon its request or as required by a mortgage
lender. Provident and the Alterra/Provident Tenants have also
agreed to review periodically the Alterra/Provident Capital
Improvement Amount to adjust as necessary to properly maintain
the properties in accordance with the requirements of the
Alterra/Provident Property Leases.
The Alterra/Provident Agreement Regarding Leases provides that,
commencing on the first month of the first calendar quarter
which occurs after the commencement date of the
Alterra/Provident Agreement Regarding Leases, and on the first
month of each calendar quarter thereafter, ALS Holdings
shall deposit with PSLT-ALS Holdings as security for the
performance of the terms, conditions and provisions of the
Alterra/Provident Agreement Regarding Leases and the
Alterra/Provident Property Leases, 50% of excess cash flow for
the prior calendar quarter, until such time as the amount held
as the security deposit is equal to $10 million. At
ALS Holdings' option, ALS Holdings may post
letters of credit in such amounts in lieu of depositing a cash
security deposit. For the foregoing purposes, excess cash flow
will be computed by taking the net operating income for all of
the Alterra/Provident Properties and subtracting the
Alterra/Provident Base Rent payable in the aggregate under all
of the Alterra/Provident Property Leases. If the
Alterra/Provident Properties achieve and maintain a lease
coverage ratio of at least 1.15 to 1.00 for two consecutive six
month periods, then the security deposit will be returned to ALS
Holdings. For the foregoing purposes, the lease coverage ratio
will be computed by taking the net operating income for all of
the Alterra/Provident Properties (subject to certain
adjustments), and dividing it by the applicable
Alterra/Provident Base Rent payable in the aggregate under all
of the Alterra/Provident Property Leases.
The Alterra/Provident Agreement Regarding Leases also provides
that PSLT-ALS Holdings may cause to be terminated the
Alterra/Provident Sublease Agreements upon the occurrence of
certain events, including if any Alterra/Provident Tenant fails
to make a rental payment under the Provident/Alterra Master
Lease and ALS Holdings fails to make rental payments under the
Agreement Regarding Leases and the failure goes uncured for more
than 30 days, if an event of default has occurred and
remains uncured under any of the Alterra/Provident Property
Leases or under the Alterra/Provident Agreement Regarding
Leases, or if the Alterra operator becomes bankrupt or
insolvent, has bankruptcy proceedings filed against it or
voluntarily files for bankruptcy. In addition, PSLT-ALS Holdings
may cause to be terminated the Alterra/Provident Sublease
Agreements if the Alterra/Provident Properties fail to maintain
on a quarterly basis a lease coverage ratio (measured quarterly
on a rolling four-quarter basis) of at least 1.05 to 1.00 during
any of the first through third lease years, and at least
1.10 to 1.00 during any of the fourth through fifteenth
lease years and during each renewal term. ALS Holdings or
the Alterra operator has the right to cure a failure to maintain
the required lease coverage ratio by posting cash or a letter of
credit in an amount sufficient to decrease, on a
dollar-for-dollar basis, the aggregate applicable
Alterra/Provident Base Rent reflected in the denominator of the
lease coverage ratio calculation to the extent necessary to be
within compliance. This cure option may only be exercised two
times during the first through tenth years of the initial term.
If PSLT-ALS Holdings terminates any Alterra/Provident Sublease
Agreement and replaces the Alterra operator with a manager or
operator other than an affiliate of Alterra, the
Alterra/Provident Tenant has the right to terminate the
Alterra/Provident Property Lease with respect to the facility to
which such Alterra/Provident Sublease Agreement has been
terminated. If PSLT-ALS Holdings terminates one or more of the
Alterra/Provident Management Agreements but the
Alterra/Provident Tenants for such applicable Alterra/Provident
Properties do not terminate the applicable Alterra/Provident
Property Leases with respect to the applicable facilities, the
Alterra/Provident Tenant will enter into a new management
agreement with a replacement manager designated by PSLT-ALS
Holdings and is required to pay such replacement manager the
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management fee pursuant to the replacement management
agreements, provided that the Alterra/Provident Tenants will be
entitled to a credit against base rent for any payments
(excluding out-of-pocket reimbursements) payable to such
replacement manager in excess of an amount equal to five percent
of gross revenues.
Each Alterra/Provident Property Lease is unconditionally
guaranteed by ALS Holdings, and ALS Holdings'
obligations under the Alterra/Provident Agreement Regarding
Leases are unconditionally guaranteed by Alterra. Under the
Alterra/Provident Property Leases, the Alterra/Provident Tenants
agreed to indemnify Provident from liabilities related to the
occupancy and operation of the Alterra/Provident Properties
prior to and during the term of the Alterra/Provident Property
Leases, with such indemnification continuing for 24 months
following the termination of any such Alterra/Provident Property
Lease.
In connection with Provident's existing mortgage financing
for the Alterra/Provident Properties, the applicable
Alterra/Provident Tenant has subordinated its rights to those of
the applicable mortgage lender, and such mortgage lender has
entered into a subordination, non-disturbance and attornment
agreement agreeing not to disturb such Alterra/Provident
Tenant's right to possession.
Each Alterra/Provident Property Lease prohibits the assignment
of any Alterra/Provident Property Lease by the applicable
Alterra/Provident Tenant. The Alterra/Provident Agreement
Regarding Leases also prohibits certain other "changes of
control" of certain Alterra entities, which includes with
certain exceptions (i) the acquisition or attainment by any
means by any person, or two or more persons acting in concert,
of direct or indirect beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) or
control of 50% or more, or rights, options or warrants to
acquire 50% or more, of the voting stock or membership interests
in Alterra, ALS Holdings or in any of the Alterra/Provident
Tenants, or (ii) the merger or consolidation of Alterra,
ALS Holdings, any Alterra/Provident Tenant or any Person that
directly or indirectly owns more than 50% of the membership
interests in ALS Holdings or any Alterra/Provident Tenant
with or into any other person, or (iii) any one or more
sales or conveyances to any person of all or substantially all
of the assets of Alterra, ALS Holdings or any
Alterra/Provident Tenant. However, the sale of 50% or more of
Alterra's outstanding stock by its stockholders, or the
sale of 50% or more of the voting stock or membership interests
in any direct or indirect parent of Alterra, does not require
Provident's or PSLT-ALS Holdings' consent if, among
other things, ALS Holdings provides evidence reasonably
satisfactory to PSLT-ALS Holdings that Alterra or any successor
guarantor under the terms of such transaction (i) has
industry experience in owning, operating and managing senior
living properties that is at least comparable to or better than
that of Alterra and (ii) has a net worth at least equal to
the net worth of Alterra immediately prior to such transaction
(which net worth determination shall not take into account any
extraordinary and non-recurring transactions during the
12 months prior to such transaction which reduces the net
worth of Alterra), both of which conditions were met in
connection with the formation transactions described in
"Business — History." In addition,
Provident's consent is not required in connection with any
initial public offering or other equity-raising transaction of
Alterra or any direct or indirect parent of Alterra or any
direct or indirect transfer of less than 50% of the ownership
interest in Alterra, provided that the stockholders who control
management of Alterra as of the date of the Lease continue to do
so.
Each Alterra/Provident Lease provides that a default pertaining
to a single facility covered by one of the Alterra/Provident
Leases is an event of default with respect to all of the
facilities covered by such lease. In addition, a default by any
Alterra/Provident Tenant under its respective lease also causes
a default under the Alterra/Provident Agreement Regarding Leases
in certain circumstances.
BLC's Sale of the BLC/Provident Properties
In October 2004, pursuant to a stock purchase agreement, or the
BLC/Provident Purchase Agreement, entered into in June 2004
between Fortress Brookdale Acquisition LLC, or FBA, and
Provident, FBA sold 100% of the outstanding capital stock of the
predecessor to BLC, Brookdale
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Living Communities, Inc., or Old Brookdale, to Provident for an
aggregate purchase price of approximately $742.4 million,
or the BLC/Provident Sale. Old Brookdale indirectly owned
21 senior living facilities, or the BLC/Provident
Properties, together with certain related personal property.
Prior to the closing of the BLC/Provident Sale in October 2004,
all of the other real and personal property owned by Old
Brookdale, all of the liabilities and obligations of Old
Brookdale other than the mortgage debt Provident assumed, and
certain liabilities relating to the BLC/Provident Properties
that are not required to be reflected or reserved on a balance
sheet in accordance with GAAP, the BLC/Provident Excluded Assets
and BLC/Provident Excluded Liabilities were transferred to or
assumed by BLC Senior Holdings Inc., which was
subsequently renamed Brookdale Living Communities, Inc. (which
we refer to as New Brookdale or BLC), or one of its wholly-owned
subsidiaries.
New Brookdale agreed to indemnify Provident for any losses
Provident may incur as a result of (a) any inaccuracy or
breach of any representation or warranty made by Fortress
Brookdale Acquisition LLC or New Brookdale in the
BLC/Provident Purchase Agreement, (b) any breach or failure
by FBA or New Brookdale to perform its obligations under the
BLC/Provident Purchase Agreement, (c) any BLC/Provident
Excluded Assets and BLC/Provident Excluded Liabilities,
(d) certain environmental claims relating to the
BLC/Provident Properties, (e) any third party claims
arising out of actions, omissions, events or facts occurring on
or prior to the closing of Provident's purchase of the
BLC/Provident Properties relating to the assets, properties and
business of Old Brookdale, and (f) certain fees and
expenses of FBA's, New Brookdale's and Old
Brookdale's advisers. New Brookdale is not required to
indemnify Provident for any loss which does not exceed $100,000
and has no obligation to indemnify Provident with respect to
certain losses until such losses exceed $2.0 million, and
in no event will New Brookdale be required to indemnify
Provident for losses in excess of $75.0 million that arise
from those matters set forth in clauses (a), (d) and
(e) above. In addition, New Brookdale is not required to
indemnify Provident for matters of which Provident's
officers obtained actual knowledge prior to the execution of the
BLC/Provident Purchase Agreement. New Brookdale is also not
required to indemnify Provident for breaches of representations
and warranties of which Provident's officers obtained
actual knowledge prior to the closing of the BLC/Provident Sale,
unless on or before such date Provident notified them of such
matters and New Brookdale and FBA agreed prior to such date that
Provident was not obligated to close the transactions
contemplated by the BLC/Provident Purchase Agreement. Moreover,
New Brookdale has generally agreed to indemnify Provident
against any tax liability with respect to periods ending on or
before, and transactions occurring before, the BLC/Provident
Sale. Provident has agreed to release FBA and its affiliates
(other than New Brookdale and its subsidiaries) from any claims
or losses arising out of the transactions contemplated by the
BLC/Provident Purchase Agreement.
Provident agreed to indemnify FBA and New Brookdale against any
losses that either may incur as a result of (a) any
inaccuracy or breach of any representation or warranty made by
Provident, (b) any breach by Provident to perform its
obligations under the BLC/Provident Purchase Agreement and
(c) certain third party claims as a result of any
inspections of the BLC/Provident Properties performed by
Provident. Provident is not required to indemnify FBA and New
Brookdale for any loss which does not exceed $75,000 and
Provident has no obligation to indemnify with respect to certain
losses until such losses exceed $2.0 million, and in no
event will Provident be required to indemnify for losses in
excess of $75.0 million which arise from those matters set
forth in clauses (a) and (c) above. Moreover,
Provident has generally agreed to indemnify New Brookdale
against any tax liability (other than tax liability required to
be borne or paid by the BLC/Provident Tenants (as defined below)
pursuant to the BLC/Provident Property Leases) with respect to
periods beginning, and transactions occurring, after the closing
of the BLC/Provident Sale.
All of the expenses incurred in connection with the consummation
of the BLC/Provident Sale, including certain of Provident's
expenses, were payable by FBA. However, upon New
Brookdale's request and pursuant to the terms of the
BLC/Provident Purchase Agreement, Provident funded
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these transaction expenses in the aggregate amount of
$7.4 million, which were contemplated as part of the
purchase price and lease basis upon which base rent is
calculated.
BLC's Master Lease Arrangements With Provident
Each BLC/Provident Property is owned by a separate subsidiary of
Provident and leased to a subsidiary of BLC, each a
BLC/Provident Tenant. Each BLC/Provident Tenant entered into a
management agreement with another subsidiary of BLC relating to
the management and operation of each of the BLC/Provident
Properties, or the BLC/Provident Management Agreements.
Concurrently with the consummation of the BLC/Provident Sale,
subsidiaries and/or affiliates of BLC entered into master lease
arrangements with Provident, which include (a) property
lease agreements for each of the BLC/Provident Properties, each
a BLC/Provident Property Lease, (b) an agreement regarding
leases, or the BLC/Provident Agreement Regarding Leases, entered
into between the parent company of the BLC/Provident Tenants, or
BLC Holdings, and the parent company of each of the owners of
the BLC/Provident Properties, or PSLT-BLC Holdings, (c) a
lease guaranty by BLC Holdings with respect to each
BLC/Provident Property Lease, and (d) a guaranty of the
BLC/Provident Agreement Regarding Leases by BLC.
Each BLC/Provident Property Lease is for an initial term of
15 years ending December 31, 2019, with two ten-year
renewal options at BLC's election, provided that, among
other things, (i) no event of default exists under any
BLC/Provident Property Lease or under the BLC/Provident
Agreement Regarding Leases and (ii) no management
termination event (as defined in the BLC/ Provident Agreement
Regarding Leases) has occurred on the date that
BLC Holdings exercises the renewal option or on the
commencement date of the renewal period. Pursuant to the
BLC/Provident Agreement Regarding Leases, the renewal option may
be exercised only with respect to all of the BLC/Provident
Properties.
Under the terms of the BLC/Provident Property Leases, the
BLC/Provident Tenants are obligated to pay base rent in an
amount equal to the BLC/Provident Lease Rate (as defined below)
multiplied by the sum of the purchase price (including certain
transaction costs incurred in connection with the BLC/Provident
Sale which, at BLC's election, Provident actually paid
(including financing costs and debt assumption fees) in the
amount of $7.4 million) plus any subsequent amounts
Provident funds in connection with capital improvements as
described in each BLC/Provident Property Lease and the
BLC/Provident Agreement Regarding Leases, such sum, the
BLC/Provident Lease Basis.
The initial lease rate for the first year of each BLC/Provident
Property Lease is 8.1%, or the BLC/Provident Lease Rate.
Commencing on January 1, 2006, and annually thereafter, the
BLC/Provident Lease Rate will be increased, as the same may be
escalated, the BLC/Provident Annual Increase, by an amount equal
to the lesser of (i) four times the percentage increase in
the Consumer Price Index during the immediately preceding year
or (ii) 3%. During the first year of each renewal term of
the BLC/Provident Property Leases, (a) the BLC/Provident
Lease Rate will be adjusted to equal the greater of (i) the
then current fair market BLC/Provident Lease Rate (as determined
by mutual agreement, or if no such agreement is reached, by an
acceptable appraisal method) or (ii) the prior year's
BLC/Provident Lease Rate times the BLC/Provident Annual
Increase, and (b) the BLC/Provident Lease Basis will be
adjusted to equal the greater of (i) the then current fair
market value of the BLC/Provident Properties (as determined by
mutual agreement, or if no such agreement is reached, by an
acceptable appraisal method) or (ii) the BLC/Provident
Lease Basis for the immediately preceding calendar month (as
such amounts in (i) and (ii) above are increased by amounts
Provident funds in connection with capital improvements, as
described in each BLC/ Provident Property Lease and the BLC/
Provident Agreement Regarding Leases).
In addition, base rent will be increased or decreased by a
"floating adjustment" tied to fluctuations in
Provident's floating rate-based mortgage indebtedness. The
floating adjustment is an amount computed monthly equal to the
increase or decrease in the applicable index (LIBOR, Prime
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or BMA) from a base value multiplied by the aggregate
outstanding principal amount of all floating rate mortgages
encumbering the BLC/Provident Properties (i.e., the dollar
amount of the BLC/Provident Floating Rate Debt (as defined
below) assumed by Provident at the inception of the
BLC/Provident Property Leases, plus if any refinancings shall
have occurred, the amount computed monthly equal to the increase
or decrease in the applicable index from a base value
(determined based on the rate in effect on the date of such
refinancing) multiplied by any additional amounts related to any
refinancing advanced by Provident to the BLC/Provident Tenants
pursuant to the terms of the BLC/Provident Property Leases and
the BLC/Provident Agreement Regarding Leases) other than from
refinancings under which BLC Holdings has not elected to
receive any proceeds, or the BLC/Provident Floating Rate Debt.
Rent under the BLC/Provident Property Leases will continue to be
escalated in accordance with the BLC/Provident Annual Increase
and the floating adjustment during each renewal term; provided,
however, that with respect to any floating rate mortgages, the
floating adjustment will apply only through the maturity date of
any underlying BLC/Provident Floating Rate Debt encumbering the
BLC/Provident Property at the commencement date of the
respective BLC/Provident Property Lease and with respect to any
refinancings that BLC either requests or under which BLC
requests net proceeds (as described below). Rent under the
BLC/Provident Property Leases is to be paid in arrears on a
monthly basis.
The BLC/Provident Property Leases include representations,
warranties and covenants customary for sale-leaseback
transactions. Lease payments are absolute triple-net, with the
BLC/Provident Tenants responsible for the payment of all taxes,
assessments, utility expenses, insurance premiums and other
expenses relating to the operation of the BLC/Provident
Properties. In addition, the BLC/Provident Tenants are required
to comply with the terms of the mortgage financing documents
encumbering the BLC/Provident Properties, if and to the extent
that, among other things, the terms of such mortgage financings
are commercially reasonable and consistent with other mortgage
financings of comparable properties in the then-current market.
Provident may, in its sole discretion, upon the request of the
BLC/Provident Tenant, fund additional necessary capital
improvements to the properties. If Provident funds any such
amounts, the BLC/Provident Lease Basis shall be increased on a
dollar for dollar basis for the amounts Provident funds. In
addition, if Provident, the BLC/Provident Tenant and the manager
mutually determine that there is an extraordinary capital
expenditure requirement at one or more of the BLC/Provident
Properties, or if Provident and any BLC/Provident Tenant
mutually agree that a capital improvement at one or more of the
BLC/Provident Properties is necessary for the applicable
BLC/Provident Property to be in compliance with legal
requirements, Provident has agreed to fund up to
$5.0 million in the aggregate over the term of the
BLC/Provident Property Leases with respect to all of the
BLC/Provident Properties and the amount that Provident funds
will be added to the BLC/Provident Lease Basis. The
BLC/Provident Tenants have covenanted to keep the BLC/Provident
Properties in good condition and repair and operate them in a
fashion similar to their operations on the commencement date of
the BLC/Provident Property Leases.
The BLC/Provident Property Leases also require the BLC/Provident
Tenants to spend, in the aggregate among the BLC/Provident
Properties, at least $450 per unit per year, or the
BLC/Provident Capital Improvement Amount, which amount will be
increased annually by the percentage increase in the Consumer
Price Index. Provident has the right to require reserved funding
of the BLC/Provident Capital Improvement Amount upon its request
or as required by a mortgage lender. Provident and the
BLC/Provident Tenants have also agreed to review periodically
BLC/Provident Capital Improvement Amount to adjust as necessary
to properly maintain the properties in accordance with the
requirements of the BLC/Provident Property Leases.
If PSLT-BLC Holdings or any of the lessors under the
BLC/Provident Property Leases desire to enter into a new
mortgage financing or a refinancing of an existing mortgage or
otherwise obtain additional mortgage debt encumbering any of the
BLC/Provident Properties through December 31, 2010,
provided there is no event of default, Provident will deliver
notice thereof to BLC Holdings together with a copy of a bona
fide term sheet setting forth the proposed terms of such mortgage
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financing. BLC Holdings may elect to have the applicable
BLC/Provident Tenant obtain the net proceeds of any such
financing or may request that Provident obtain a financing that
will provide additional net proceeds for the applicable
BLC/Provident Tenant. In addition, BLC Holdings has the
right, through December 31, 2010, to request two times per
calendar year that Provident attempt to obtain a new mortgage or
a refinancing of an existing mortgage with respect to the
BLC/Provident Properties. Provident has agreed that it will use
commercially reasonable efforts to obtain any such financing but
will be obligated only to seek such new financing from the
holder of the mortgage financing then in place with respect to
the applicable BLC/Provident Property.
Net financing or refinancing proceeds advanced by Provident to
the BLC/Provident Tenants as described in the immediately
preceding paragraph, each a BLC/Provident Tenant Refinance
Advance, will be added to the BLC/Provident Lease Basis under
the applicable BLC/Provident Property Lease. All fees,
penalties, premiums or other costs related to any BLC/Provident
Tenant Refinance Advance will also be included in the
BLC/Provident Lease Basis, except that if the applicable
BLC/Provident Tenant obtains net proceeds of any financing
Provident initiates, then only such portion of the fees,
penalties, premiums or other costs related to any such
BLC/Provident Tenant Refinance Advance, as it relates to the
proceeds disbursed to the applicable BLC/Provident Tenant, will
be included in the BLC/Provident Lease Basis. In addition, if
the monthly debt service relating to a BLC/Provident Tenant
Refinance Advance exceeds the amount of rent that will be
payable relating to the increase in the BLC/Provident Lease
Basis as a result of such BLC/Provident Tenant Refinance
Advance, then the applicable BLC/Provident Tenant is required to
pay the excess, and under certain circumstances the applicable
BLC/Provident Tenant will also be required to pay additional
amounts relating to increases in debt service and other costs
with respect to the remaining portion of the balance of the
refinancing, or the Additional Debt Service Costs.
Under the BLC/Provident Agreement Regarding Leases, Provident
agreed that, through December 31, 2010, PSLT-BLC Holdings
will not (i) pledge or otherwise encumber its interest in
any of the lessors under the BLC/Provident Property Leases, or
(ii) permit the lessors under the BLC/Provident Property
Leases to pledge or otherwise encumber the BLC/Provident
Properties or their interests in the BLC/Provident Property
Leases, other than any existing mortgages, new mortgages,
refinancings of existing mortgages or other additional mortgage
debt encumbering the BLC/Provident Properties. In addition,
Provident agreed that it will not, and that PSLT-BLC Holdings
and the lessors under the BLC/Provident Property Leases will
not, enter into any agreement which contains covenants or other
agreements expressly restricting the ability of any lessor under
the BLC/Provident Property Leases to enter into a financing
which has been requested by BLC Holdings, as described above, or
expressly limiting the amount that may be borrowed thereunder,
except for any existing mortgages, new mortgages, refinancings
of existing mortgages or other additional mortgage debt that may
encumber the BLC/Provident Properties from time to time.
Pursuant to the BLC/Provident Agreement Regarding Leases, FBA
deposited $20.0 million at closing with PSLT-BLC Holdings
as security for the performance of the terms, conditions and
provisions of the BLC/Provident Agreement Regarding Leases and
the BLC/Provident Property Leases. Provided there is no event of
default under the BLC/Provident Agreement Regarding Leases,
BLC Holdings has the right to request that portions of the
security deposit be paid to the BLC/Provident Tenants' to
reimburse them for the expenditure requirement under each of the
BLC/Provident Property Leases with respect to capital
improvements of $450 per unit per year (in the aggregate)
among the BLC/Provident Properties, up to a maximum amount of
$600 per unit per year. If the BLC/Provident Properties
achieve and maintain a lease coverage ratio of at least 1.10 to
1.00 for a consecutive twelve month period, then
$10.0 million of the security deposit will be returned to
BLC Holdings. If the BLC/Provident Properties achieve and
maintain a lease coverage ratio of at least 1.15 to 1.00 for a
consecutive twelve month period, then $15.0 million of the
security deposit will be returned to BLC Holdings. Any
balance of the security deposit will be returned to
BLC Holdings if the BLC/Provident Properties achieve and
maintain a lease coverage ratio of at least 1.20 to 1.00 for
twelve consecutive months. For the foregoing purposes, the lease
coverage ratio will be computed by
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taking the net operating income for all of the BLC/Provident
Properties (subject to certain adjustments, including reductions
for management fees and capital expenditure requirements), and
dividing it by base rent payable and Additional Debt Service
Costs in the aggregate under all of the BLC/Provident Property
Leases.
The BLC/Provident Agreement Regarding Leases also provides that
PSLT-BLC Holdings may terminate the BLC/Provident Management
Agreements upon the occurrence of certain events, including if
any BLC/Provident Tenant fails to make a rental payment and the
failure goes uncured for more than 30 days, if an event of
default has occurred and remains uncured under any of the
BLC/Provident Property Leases or under the BLC/Provident
Agreement Regarding Leases, or if the Brookdale manager becomes
bankrupt or insolvent, has bankruptcy proceedings filed against
it or voluntarily files for bankruptcy. In addition, PSLT-BLC
Holdings may terminate the BLC/Provident Management Agreements
if the BLC/Provident Properties fail to maintain on a quarterly
basis a lease coverage ratio (subject to certain adjustments) of
at least 1.05 to 1.00 from January 1, 2009 through
December 31, 2011; 1.10 to 1.00 from January 1, 2012
through December 31, 2016; and 1.15 to 1.00 from
January 1, 2017 through December 31, 2019 and during
each renewal term. BLC Holdings or the Brookdale manager
has the right to cure a failure to maintain the required lease
coverage ratio by posting cash or a letter of credit in an
amount sufficient to increase on a dollar-for-dollar basis the
net operating income reflected in the numerator of the lease
coverage ratio calculation to the extent necessary to be within
compliance. This cure option is available through
December 31, 2014 and may only be exercised two times
thereafter through December 31, 2019. If PSLT-BLC Holdings
terminates the BLC/Provident Management Agreement and replaces
the Brookdale manager with a manager other than an affiliate of
Brookdale, the BLC/Provident Tenant has the right to terminate
the BLC/Provident Property Leases as to which the BLC/Provident
Management Agreements have been terminated. If PSLT-BLC Holdings
terminates one or more of the BLC/Provident Management
Agreements but the BLC/Provident Tenants for such applicable
BLC/Provident Properties do not terminate the applicable
BLC/Provident Property Leases, the BLC/Provident Tenants will
enter into new management agreements with a replacement manager
designated by PSLT-BLC Holdings and will be required to pay any
replacement manager the management fee pursuant to the
replacement management agreements, provided that the
BLC/Provident Tenants will be entitled to a credit against base
rent for any payments (excluding out-of-pocket reimbursements)
payable to such replacement manager in excess of an amount equal
to five percent of gross revenues.
Each BLC/Provident Property Lease is unconditionally guaranteed
by BLC Holdings and BLC Holdings' obligations
under the BLC/Provident Agreement Regarding Leases are
unconditionally guaranteed by BLC. Under the BLC/Provident
Agreement Regarding Leases, it is a default if the net worth of
BLC declines to less than $75.0 million; provided that
Brookdale may cure any such default by depositing cash
collateral in the amount of (i) one month's rent under
all of the BLC/Provident Property Leases, if BLC's net
worth is between $50.0 million and $75.0 million;
(ii) three months' rent, if BLC's net worth is
between $25.0 million and $50.0 million; and
(iii) six months' rent, if BLC's net worth is
$25.0 million or less. For purposes of the foregoing net
worth test, BLC's "net worth" means the sum of
BLC's net worth, determined in accordance with GAAP, plus
the "deferred gain" that results from the transactions
contemplated by the BLC/Provident Stock Purchase Agreement,
which, for the purposes of the BLC/Provident Agreement Regarding
Leases is deemed not to exceed $110.0 million. Under the
BLC/Provident Property Leases, the BLC/Provident Tenants agreed
to indemnify Provident from all liabilities related to the
occupancy and operation of the BLC/Provident Properties prior to
and during the term of the BLC/Provident Property Leases, with
such indemnification continuing for twelve months following any
termination of the BLC/Provident Property Leases for any claims
made with respect to incidents occurring prior to the end of the
lease term.
In connection with any new mortgage financing, the applicable
BLC/Provident Tenant will subordinate its rights to those of
such new mortgage lender, provided such mortgage lender enters
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into a subordination, non-disturbance and attornment agreement
and agrees not to disturb such BLC/Provident Tenant's right
to possession.
BLC has a right of first refusal if certain conditions set forth
in that certain letter agreement dated March 28, 2005 are
met. If, during the initial term, Provident receives a bona fide
offer to purchase any of the properties leased to BLC that
Provident seeks to accept, Provident will notify BLC of the
offer and BLC has five days from receipt of the notice of
proposed sale to notify Provident of its election to purchase
all but not less than all of the property or properties that are
the subject of said notice (or ownership interests in the
applicable BLC/Provident Landlords) at the price reflected in
the bona fide offer, or the BLC/Provident Purchase Notice. BLC
is also required to pay Provident a non-refundable deposit of 2%
of the purchase price within three business days of the
BLC/Provident Purchase Notice and to close on the purchase of
the properties within 60 days following the BLC/Provident
Purchase Notice. In the event BLC does not give notice that it
wishes to acquire the properties in question, or pay the deposit
or close on the properties within these time frames, the right
of first refusal is deemed waived with regard to the proposed
sale. Further, if BLC gives the BLC/Provident Purchase Notice
and pays the deposit, but then fails to close (except under
limited circumstances out of BLC's control), the entire
right of first refusal automatically becomes null and void as to
all of the properties leased to BLC. Notwithstanding the receipt
of a BLC/Provident Purchase Notice, at any time prior to the
closing of the sale of the properties to BLC under the right of
first refusal, Provident may nevertheless proceed to sell the
properties that were the subject of the bona fide offer to any
third party so long as Provident pays BLC an amount equal to two
times the amount of the deposit upon the closing of such sale
(which amount includes a refunding of the deposit).
Each of the BLC/Provident Property Leases prohibits the
assignment of any BLC/Provident Property Lease by the applicable
BLC/Provident Tenant. The BLC/Provident Agreement Regarding
Leases also prohibits certain other "changes of
control" of BLC entities, which includes (i) the
acquisition or attainment by any means by any person, or two or
more persons acting in concert, of direct or indirect beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) or control of 50% or more, or rights,
options or warrants to acquire 50% or more, of the voting stock
or membership interests in BLC, BLC Holdings or in any of
the BLC/Provident Tenants, or (ii) the merger or
consolidation of BLC, BLC Holdings, any of the BLC/Provident
Tenants or any Person that directly or indirectly owns more than
50% of the membership interests in BLC, BLC Holdings or any
of the BLC/Provident Tenants with or into any other Person, or
(iii) any one or more sales or conveyances to any Person of
all or substantially all of the assets of BLC, BLC Holdings or
any of the BLC/Provident Tenants. However, any sale by BLC of
all or substantially all of its assets or any sale of more than
50% of BLC's outstanding stock by its stockholders, or the
sale of more than 50% of the membership interests in FBA, does
not require Provident's consent if
(i) BLC Holdings provides evidence reasonably
satisfactory to PSLT-BLC Holdings that the industry experience
of the guarantor under the terms of such transaction in owning,
operating and managing senior living properties similar to
BLC's properties is at least comparable to or better than
that of BLC and (ii) the guarantor under the terms of such
transaction has a net worth at least equal to $75.0 million
both of which conditions were met in connection with the
formation transactions described in "Business —
History." In addition, Provident's consent is not
required in connection with (a) any initial public offering
or other equity-raising transaction of BLC or (b) any
direct or indirect transfer of less than 50% of the ownership
interest in BLC or FBA, if, in the case of a transfer
contemplated by clause (b), the current stockholders or
members, as the case may be, continue to control Provident.
A default by any BLC/Provident Tenant under its BLC/Provident
Property Lease causes a default under the BLC/Provident
Agreement Regarding Leases in certain circumstances. In
addition, in certain circumstances termination of some of the
BLC/Provident Property Leases may cause an event of default
under facility mortgages.
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Capstead Lease Arrangement with BLC
In December 2001, BLC entered into an agreement to purchase the
Chambrel Portfolio, for which it made earnest money deposits in
the aggregate amount of $4.0 million. In connection with
the closing, BLC assigned its rights under the purchase and sale
agreements to subsidiaries of Capstead and on May 1, 2002,
seven BLC subsidiaries, or the Chambrel Property Tenants,
entered into separate property lease agreements, or the Chambrel
Property Leases, with seven subsidiaries of
CMCP Properties, Inc., or Capstead Lessor, to lease the
Chambrel Portfolio. Simultaneously with the entering into of the
Chambrel Property Leases, BLC Properties I, LLC and
Brookdale Management Holding, LLC, collectively, the Chambrel
Master Tenant, entered into the Chambrel Master Lease with
Capstead Lessor. BLC Properties I, LLC has agreed to
guaranty the payment and performance of all of the Chambrel
Property Tenants' obligations under the Chambrel Property
Leases and BLC has agreed to indemnify Capstead Lessor for
certain bad acts by the Chambrel Property Tenants.
The Chambrel Master Lease is for an initial term of
20 years and expires on April 30, 2022. The Chambrel
Master Tenant has the right to renew all but not less than all
of the Chambrel Property Leases for two ten-year renewal terms.
The Chambrel Master Lease terms are co-terminus with the terms
of the Chambrel Property Leases.
The Chambrel Property Leases include representations, warranties
and covenants customary for sale-leaseback transactions. Under
the Chambrel Master Lease, Chambrel Master Tenant is obligated
to pay to Capstead Lessor monthly rent in the amount of 1.25% of
the amount of capital investment Capstead made with respect to
its acquisition of the Chambrel Portfolio (including all
transaction costs incurred by Capstead in connection with the
acquisition), which was approximately $31.5 million at the
time of the acquisition, which amount has subsequently been
reduced to reflect the sale of the Chambrel property located in
Akron, Ohio. The rent under the Chambrel Master Lease is
adjusted on May 1 of each lease year by multiplying the
rent due for the immediately preceding lease year by the
increase in the consumer price index (excluding energy and food
prices), provided that such increase shall not exceed 3%. The
current amount of rent payable fluctuates monthly because the
lease payment is based on the underlying debt, which is a
pass-through, and fluctuates with changes in interest rates. For
the year ended December 31, 2004 and the quarter ended
March 31, 2005, the lease payment was $10.3 million
and $2.7 million, respectively.
If at any time the Chambrel Portfolio fails to maintain a lease
coverage ratio, which is defined as the quotient of (i) the
total revenues, less operating expenses to (ii) the current
rent payment, of at least 1.10 on an aggregate basis, such
failure shall constitute an event of default under the Chambrel
Master Lease.
Under the Chambrel Property Leases, each Chambrel Property
Tenant is obligated to pay rent equal to all payments of debt
service (defined as the aggregate monthly interest and principal
due and payable under any facility mortgage or bond documents,
including and principal reserve payments) and debt costs and
reserves (defined as all payments, charges and costs payable to
the facility mortgagee other than debt service, including,
without limitation, late charges, default interest, any
reserves, impounds or escrows required for impositions,
insurance premiums or reserves for capital expenditures required
under the facility mortgage) as they relate to the outstanding
debt encumbering the Chambrel Portfolio directly to the relevant
lender.
Upon the final maturity of any financing currently encumbering
any Chambrel property resulting in a balloon payment of
principal, Capstead shall be obligated to pay the amount
necessary to retire such indebtedness, and such balloon payment
shall not be included in the debt service calculation.
The Chambrel Property Leases are "absolute net"
leases, such that the Chambrel Property Tenants are obligated to
pay all costs and expenses incurred with respect to, and
associated with,
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the Chambrel Portfolio, including, without limitation, all
impositions, utility charges, insurance costs, maintenance costs
and repair and restoration expenses.
At any time after the fifth lease year, Chambrel Master Tenant
has the option to purchase all, but not less than all, of the
Chambrel Portfolio or the ownership interest of Capstead,
subject to the rights of any Chambrel property mortgagee to
consent to such a purchase, at a price equal to the greater of
(i) the fair market value of the Chambrel Portfolio, and
(ii) Capstead's equity in the Chambrel Portfolio, plus
the original principal balance of all financings encumbering the
Chambrel Portfolio on the date of entering into the Chambrel
Master Lease.
Chambrel Master Tenant shall not, without the prior written
consent of Capstead Lessor, sell, assign or otherwise transfer
its ownership interest in the Chambrel Property Tenants or any
interest Chambrel Master Tenant has under the Chambrel Master
Lease. It shall constitute an event of default if (i) a
change of control which is defined as the acquisition by any
person, or two or more persons acting in concert, of beneficial
ownership of 50% or more, or rights, options or warrants to
acquire 50% or more, of the outstanding shares of voting stock
of Chambrel Master Tenant or any of the Chambrel Property
Tenants (other than the parent of Chambrel Master Tenant or any
of its affiliates in a transaction which shall not result in any
release of liability or obligation under the Chambrel Master
Lease) or the merger or consolidation of Chambrel Master Tenant
or any Chambrel Property Tenant with or into any other person or
any one or more sales or conveyances to any person of all or
substantially all of the assets of Chambrel Master Tenant or the
Chambrel Property Tenants (other than the parent of Chambrel
Master Tenant or any of its affiliates in a transaction which
shall not result in any release of liability or obligation under
the Chambrel Master Lease) occurs with respect to Chambrel
Master Tenant or if the ownership interest of Chambrel Master
Tenant in the Chambrel Property Tenants is voluntarily or
involuntarily transferred, assigned, conveyed, levied upon or
attached; and (ii) any person (other then the person who,
as of the entry into the Chambrel Master Lease, directly or
indirectly has an ownership interest in Chambrel Master Tenant)
acquired more than 9.8% of the outstanding ownership interest in
Chambrel Master Tenant, which in Capstead Lessor's sole
discretion, would adversely affect the status of Capstead Lessor
or its parent as a real estate investment trust under the tax
code.
Failure of any Chambrel Property Tenant to pay for money
borrowed or for the deferred purchase price of material property
or services or any guaranty relating thereto that in the
aggregate exceeds $250,000 and which becomes due prior to
maturity as a result of such Chambrel Property Tenant's
failure shall also trigger a default under the applicable
Chambrel Property Lease. Also, a continuing default under any
Chambrel Property Lease is an event of default under the
Chambrel Master Lease.
Ventas Lease Arrangement with BLC
During the first quarter of 2004, the limited partnerships that
owned 14 facilities, in which subsidiaries of BLC held general
and limited partnership interests, sold those facilities to
Ventas for approximately $114.6 million. Ventas also
acquired another facility from a third party in a separate
transaction. Simultaneously with such sales, six wholly-owned
subsidiaries of BLC, or the Ventas Tenants, entered into and
became the tenants under a master lease, or the Ventas Master
Lease, with Ventas. The Ventas Master Lease currently covers
13 facilities, or the Ventas Properties, and there are two
additional facilities that, because of restrictions contained in
their current financings, are leased to Ventas Tenants pursuant
to individual leases, or the Other Ventas Leases (together with
the Ventas Master Lease, the Ventas Lease), substantially
similar to the Ventas Master Lease and which will be added to
the Ventas Master Lease when their current financing expires.
BLC has guaranteed the Ventas Master Lease for the full and
prompt payment and performance of all of Ventas Tenants'
obligations under the Ventas Master Lease. The guaranty requires
that BLC maintain a net worth (as defined) of not less than
$100.0 million. For purposes of the foregoing net worth
test, BLC's "net worth" means the sum of
BLC's net worth, determined in accordance with
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generally accepted accounting principles, or GAAP, plus the
"deferred gain" that results from the BLC/ Provident
Stock Purchase Agreement.
The Ventas Master Lease's initial term is for 15 years
and expires on January 31, 2019. The Ventas Tenants have
two ten-year renewal options under the Ventas Master Lease.
The Ventas Tenants and BLC have posted a security deposit with
Ventas in the amount of six months' of lease payments, or
$7.4 million (all in the form of letters of credit).
Under the terms of the Ventas Master Lease, the Ventas Tenants
currently are obligated to pay per annum rent of
$14.6 million, which amount is net of a $0.2 million
rent credit for one property, or the Ventas Base Rent, in equal
monthly installments during the first year of the lease. The
Ventas Base Rent increases annually by the greater of
(i) 2.0% and (ii) 75% of the increase in the consumer
price index.
Under the Ventas Master Lease, Ventas Tenants are required to
maintain, as of the end of each fiscal quarter, a portfolio
coverage ratio of not less than 1.10:1.00. Failure to do so
shall not be an event of default if (i) the portfolio
coverage ratio is greater than or equal to 1.00:1.00 subject to
certain adjustments, including reductions for management fees,
insurance costs and capital expenditure requirements, and
(ii) within 15 days following the date on which Ventas
Tenants were required to deliver its computation of the
portfolio coverage ratio for such fiscal quarter, Ventas Tenants
deposit with Ventas an additional security deposit equal to an
amount that, had such amount been added to the cash flow for
such 12 month period, the portfolio coverage ratio for such
period would have been equal to 1.10:1.00. Notwithstanding the
forgoing, Ventas Tenants shall have the ability to cure a breach
of the portfolio coverage ratio in such a manner no more than
five times during the term of the lease.
No Ventas Tenant shall amend or otherwise change, by consent,
acquiescence or otherwise, the number of units at any facility
(in excess of 2% of the number of such units at any such
facility as of the lease commencement date) or the type and/or
licensed capacity at such facility (by more than 2% of the type
and/or licensed capacity at any such facility as of the lease
commencement date).
The Ventas Tenants were required to expend $350 per unit in
the first year of the Ventas Master Lease for capital
expenditures. Each year thereafter, the required amount of
capital expenditures is increased by the greater of
(x) 1.5% and (y) 75% of the actual increase in the
consumer price index. If the Ventas Tenants fail to make such
required capital expenditures, then Ventas has the right to
require the Ventas Tenants to fund a reserve to satisfy Ventas
Tenants' annual capital expenditure requirements equal to
1/12 of the difference between the annual capital expenditure
spending requirement and the actual amount budgeted and/or spent
by the Ventas Tenants in the applicable year. Ventas Tenants are
also required to deposit into escrow one year's worth of
real estate taxes and insurance premiums in monthly installments
as a real estate tax reserve and insurance premium reserve,
respectively, all of which has been funded.
Ventas Tenants, BLC, and each of their respective affiliates
(excluding, however, Fortress and Capital Z Partners, and
affiliates of each (other than BLC and its direct or indirect
subsidiaries)) shall not participate in the development or
construction of any assisted living facility or senior
independent living facility that (i) competes in any way
with, directly or indirectly, or is comparable in any way to,
any Ventas Properties, and (ii) is located within a
5 mile radius of any Ventas Property.
The Ventas Tenants have a one time purchase option for all
facilities except the Seasons of Glenview facility located in
Glenview, Illinois, during the 15th year of the Ventas
Master Lease, pursuant to which they may purchase the Ventas
Properties at their fair market value adjusted to reflect above
or below market financing on the existing financings on the
Ventas Properties at the commencement date of the Ventas Master
Lease, provided that there is a minimum purchase price equal to
Ventas' purchase price for the Ventas Properties as
increased annually by the greater of (i) 1.5% and
(ii) 75% of the increase in consumer price index.
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The Ventas Master Lease does not permit (i) a conveyance,
sale, assignment, transfer, pledge, hypothecation, encumbrance
or other disposition of the direct or indirect interests in the
Ventas Tenants or BLC such that after such disposition any
person, together with its affiliates, owns or controls, directly
or indirectly, in the aggregate more than fifty percent of the
beneficial ownership interests of the Ventas Tenants or BLC or
possesses, directly or indirectly, the power to direct or cause
the direction of the management or policies of the Ventas
Tenants or BLC, whether through the ability to exercise voting
power, by contract or otherwise, or a Ventas Change of Control;
or (ii) BLC from merging or consolidating with any other
person or selling all or substantially all or its assets to any
other person on or subsequent to the date of the entering into
of the Ventas Master Lease, unless (a) immediately
following such Ventas Change of Control, BLC has a net worth, as
defined above, equal to or greater than $100.0 million;
(b) there is no then existing monetary event of default;
and (c) such change of control would not otherwise result
in a default or "event of default" under, and as
defined in, the Ventas Master Lease, the guaranty or the
property management contract.
It shall be an event of default if there is (i) a default under
the BLC/Provident Lease and related documents that in the
aggregate results in obligations of $2.0 million or more
becoming due and payable, (ii) a default or breach by BLC of any
other contract or agreement that in the aggregate results in
more than $10.0 million becoming due and payable;
(iii) with certain exceptions, any material default under
any material agreement between the tenants under the Ventas
Lease and the Ventas Landlord (and its affiliates); (iv) a
default under any credit, guaranty or similar agreement where
BLC is a party and maintains recourse obligations or provides
credit enhancement support if such default results in
acceleration aggregating $25.0 million or more of
indebtedness; or (v) with certain exceptions, any material
default under the Other Ventas Leases. In addition, with certain
exceptions any default pertaining to a single facility
constitutes an event of default with respect to all facilities
covered by the Ventas Master Lease.
Health Care REIT's Master Lease Arrangement with
Alterra
In July 2001, individual leases on 38 residences that were
previously leased by Alterra from HCR and its affiliates were
terminated, and Alterra entered into a single master lease with
HCR and its affiliates with respect to 36 of such residences. In
subsequent amendments, ten additional properties with a capacity
for 424 residents were refinanced out of unaffiliated
lender/lessor portfolios and added to the master lease, and one
property originally included in the master lease was sold and
removed from the master lease. As a result, Alterra currently
leases 45 facilities from HCR and its affiliates under the
master lease.
The HCR Master Lease is for an initial term that expires
March 19, 2017. Alterra has one fifteen-year renewal option.
Under the terms of the HCR Master Lease, Alterra is obligated to
pay monthly base rent, as the same may be increased from time to
time, the HCR Base Rent, based upon the aggregate amount of any
funds advanced by HCR to Alterra pursuant to the terms of the
HCR Master Lease (approximately $81.7 million as of time of
execution of the HCR Master Lease; subject to adjustment as
properties are or have been added to or removed from the
portfolio) multiplied by 10.72%. HCR Base Rent increases
annually to an amount equal to the HCR Base Rent for the prior
year plus the lesser of (i) the maximum rent adjustment
(which is equal to the prior year's HCR Base Rent
multiplied by 1.025) and (ii) an amount determined by
multiplying the prior year's HCR Base Rent by the increase
in the consumer price index. If any annual adjustment based on
the increase in the consumer price index is in excess of the
maximum rent adjustment, then the excess is applied to previous
years in which the increase was less than the maximum rent
adjustment. The current rent payable under the HCR Master Lease
is approximately $13.5 million. The rent payable under the
HCR Master Lease is a net rent payable to HCR, with Alterra
responsible for the payment of all taxes, assessments, utility
expenses, insurance premiums and other expenses relating to the
operation of the HCR Properties.
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Alterra has the option to purchase the HCR Properties upon
notice given during the last six months of the initial term or
renewal term, with an option price equal to the greater of
(i) any funds advanced by HCR to Alterra pursuant to the
terms of the HCR Master Lease, including the initial lease
advance of approximately $81.7 million, as the same may be
adjusted as properties are or have been added to or removed from
the portfolio and (ii) the fair market value of the HCR
Properties at the time of the exercise of the option.
Alterra is required to maintain a letter of credit with HCR as a
security deposit for the performance of Alterra's
obligations under the HCR Master Lease. The letter of credit
currently held by HCR is approximately $1.1 million
provided such amount may be increased to reflect any additional
amounts advanced to Alterra by HCR. Alterra's obligation to
maintain the letter of credit terminates if the portfolio
coverage ratio (the ratio of (i) portfolio cash flow to
(ii) the rent payments under the HCR Master Lease and all
other debt service and lease payments relating to the HCR
Properties) equals or exceeds 1.75:1.00 for four consecutive
fiscal quarters. In addition, Alterra has agreed to use its best
efforts to deliver to HCR additional letters of credit as
security deposits equal to approximately $0.7 million.
The HCR Master Lease prohibits the assignment of Alterra's
interest in the HCR Master Lease without HCR's consent. A
change in Alterra's stock ownership is not a prohibited
assignment. If Alterra seeks to effect a merger, consolidation,
or other structural change without HCR's consent, then
Alterra must have a net worth (calculated in accordance with
GAAP) of $50.0 million immediately following such
transaction.
Alterra must maintain a portfolio coverage ratio in excess of
1.00 for 2005 and 1.20 for each year thereafter. Alterra must
also maintain available working capital per property in the
amount of $100,000. Failure to comply with the aforementioned
financial covenants will not constitute an event of default
unless such failure negatively affects 5% or more of the total
beds at the HCR Properties. If the failure affects less than 5%
of total beds at the HCR Properties, then Alterra shall have
90 days after the occurrence of the potential event of
default to cure such failure to comply with the financial
covenant. If such potential event of default is not cured within
the 90 day period, then Alterra is obligated within
12 months thereafter to either (i) provide a
substitute property for that portion of the HCR Properties that
caused the potential event of default, which substitute property
must satisfy all of HCR's underwriting requirements, or
(ii) acquire that portion of the HCR Property which caused
the potential event of default at a price equal to the greater
of (a) the fair market value of such HCR Property and
(b) the allocated lease amount for the HCR Property plus
10% of the allocated lease amount. A loss of licensure or a bed
reduction in excess of 3% at any HCR Property shall also
constitute an event of default.
If Alterra achieves a facility coverage ratio in excess of
1.30:1.00 for eight consecutive quarters by July 2005 for the
four residences in Valparaiso, Indiana and Vero Beach, Florida,
then HCR has agreed to disburse $250,000 to Alterra as an
earnout amount provided that HCR's investment amount for
such residences is less than 90% of their appraised value and
provided certain other conditions in the HCR Master Lease are
satisfied. Alterra has satisfied this required facility coverage
ratio through 2004 and expects to continue to do so.
An event of default pertaining to a single facility covered by
the HCR Master Lease constitutes an event of default with
respect to all facilities covered by the HCR Master Lease.
SNH's Sale-Leaseback Arrangement with Alterra
On February 28, 2003, pursuant to a purchase and sale
agreement, or the SNH Purchase Agreement, two subsidiaries of
Alterra, ALS-Venture II, Inc., now inactive, and Wynwood of
Chapel Hill, LLC, together the Alterra SNH Sellers, sold 25
assisted living properties, or the SNH Properties, to SNH ALT
Leased Properties Trust, or SNH, for an aggregate purchase price
of approximately $61.0 million, or the SNH Sale.
Simultaneously, AHC Trailside, Inc., a subsidiary of Alterra, or
AHC Trailside, entered into and became the tenant under a lease
with SNH for the SNH Properties. Pursuant to the SNH Purchase
Agreement, the Alterra SNH Sellers have agreed to indemnify SNH
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against all obligations, claims, losses, damages, liabilities
and expenses arising out of (i) events, contractual
obligations, acts or omissions of the Alterra SNH Sellers
occurring in connection with the ownership or operation of any
of the SNH Properties prior to closing of the SNH Sale or
(ii) any damage to property of others or injury to or death
of any person or any claims or any debts or obligations
occurring on or about or in connection with any of the SNH
Properties at any time prior to such closing. Subject to the
terms of the SNH Lease, SNH has agreed to indemnify the Alterra
SNH Sellers against all obligations, claims, losses, damages,
liabilities and expenses arising out of (i) events,
contractual obligations, acts or omissions of SNH that occur in
connection with ownership or operation of any of the SNH
Properties on or after closing of the SNH Sale, or (ii) any
damage to property of others or injury to or death of any person
or any claims or any debts or obligations occurring on or about
any of the SNH Properties at any time after such closing.
Alterra has guaranteed the payment and performance of AHC
Trailside's obligations under the SNH Lease and the
obligations of the Alterra SNH Sellers under the SNH Purchase
Agreement. The obligations of AHC Trailside under the SNH Lease,
the obligations of the Alterra SNH Sellers under the SNH
Purchase Agreement and the obligations of Alterra under its
guaranty are secured by Alterra's pledge of 100% of the
capital stock of AHC Trailside, security liens on all of AHC
Trailside's personal assets and security liens on all of
Alterra's personal assets arising from or used in
connection with the SNH Properties.
The SNH Lease's initial term, or the SNH Initial Term,
expires on December 31, 2017. AHC Trailside has two
fifteen-year renewal options, each, an SNH Renewal Term.
Under the terms of the SNH Lease, AHC Trailside must pay, on a
monthly basis, base rent, as the same may be increased from time
to time, the SNH Base Rent, in an amount equal to approximately
$0.6 million. If SNH is required to pay for any repairs,
maintenance, renovations, or replacements at the SNH Properties,
the SNH Base Rent increases yearly by an amount equal to
(i) the greater of (a) 10% and (b) the per annum
rate for 15 year U.S. treasury obligations plus
500 basis points not to exceed 11.5% times (ii) the
amount so disbursed for such items. AHC Trailside must also pay
additional rent with respect to each lease year, in an amount
equal to 10% of the net resident revenues for each property in
excess of the net resident revenue for 2003. Notwithstanding the
above, in no event shall the aggregate amount of SNH Base Rent
and additional rent payable in any calendar year exceed an
amount equal to approximately $7.2 million in 2004, as
subsequently increased by 3% per year. The current amount
of SNH Base Rent and additional rent payable is approximately
$7.3 million per annum, as may be adjusted simultaneously
with an adjustment to SNH Base Rent pursuant to the
SNH Lease or any decrease in the additional rent as a
result of the reduction in the number of units available at the
SNH Properties.
The SNH Lease includes representations, warranties and covenants
customary for sale-leaseback transactions. The rent paid by AHC
Trailside is absolutely net to SNH, so that the payments yield
to SNH the full amount of the installments or amounts of rent
throughout the term. AHC Trailside has covenanted to keep the
leased property and all private roadways, sidewalks, and curbs
appurtenant thereto in good order and repair, reasonable wear
and tear excepted.
AHC Trailside has covenanted to maintain a positive tangible net
worth (which is defined as the excess of total assets over total
liabilities, excluding from the determination of assets any
items that are treated as intangibles in conformity with GAAP)
at all times. AHC Trailside is also prohibited from creating,
incurring, assuming or guaranteeing, or permitting to exist, or
becoming or remaining liable upon any additional indebtedness
(with typical exceptions for items incurred in the ordinary
course of operating the SNH Properties). AHC Trailside may
not engage in any trade or business other than the leasing and
operating of the SNH Properties.
It is an event of default if there is any direct or indirect
change in control of AHC Trailside or Alterra without consent. A
change of control includes (i) the acquisition by any
person, or group of persons acting in concert, of record
ownership of, or the right to vote, or the power to direct the
vote of, in excess of 50% of the voting power of the outstanding
shares of voting stock of AHC Trailside
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or Alterra, (ii) the merger or consolidation of AHC
Trailside or Alterra with or into any other person,
(iii) any one or more sales or conveyances to any person of
all or substantially all of its assets or business of AHC
Trailside or Alterra, and (iv) a change in majority of AHC
Trailside's or Alterra's board of directors (excluding
changes where a new director is elected or approved by a
majority of the board in office on the effective date of
Alterra' Plan of Reorganization or previously so elected or
approved); provided, however, that no change of control shall be
deemed to have occurred as a result or arising out of any
acquisition referred to in clause (i) immediately above
with respect to the voting power of the outstanding shares of
voting stock of any parent of AHC Trailside so long as such
parent is a guarantor and at the time of such acquisition and
immediately thereafter such parent has a consolidated tangible
net worth at least equal to $50.0 million. Following the
purchase of FIT REN LLC by Alterra, as described in
"Business — History," Alterra had a net
worth in excess of $50.0 million and remained a guarantor
of the SNH Lease.
A default pertaining to one facility under the SNH Lease
causes a default with respect to all facilities covered by the
SNH Lease. In addition, the following constitute an event of
default under the SNH Lease: (i) if any obligation of AHC
Trailside in respect of any indebtedness for money borrowed or
material property or services, or any guaranty related thereto
becomes due prior to maturity; and (ii) a material default
by AHC Trailside, Alterra or any of their affiliates under the
other documents relating to the SNH Portfolio (e.g., the
purchase agreement, stock pledge agreement, guaranty, etc.).
LTC's Master Lease Arrangement with Alterra
Effective January 1, 2003, individual leases on 35 of the
residences that were previously leased by Alterra from LTC
Properties, Inc., or LTC, and its affiliates were either
terminated or amended and restated, and Alterra entered into
four separate leases or the LTC Master Leases, which we are now
parties to or have guaranteed, with LTC and its affiliates with
respect to such residences. The term of the LTC Master Leases
expires on December 31, 2020, or the LTC Initial Term. We
have two ten-year renewal options, each a LTC Extended Term,
under the LTC Master Leases. LTC, at its option upon meeting
certain conditions precedent, may cause Alterra and the Company
to consolidate the LTC Master Leases into a single master lease
on substantially the same terms and conditions as the LTC Master
Leases.
Aggregate current LTC Initial Term Minimum Rent is
$9.3 million per annum. The LTC Initial Term Minimum Rent
increases annually to an amount equal to the LTC Initial Term
Minimum Rent for the prior lease year plus an amount determined
by multiplying the prior year's LTC Initial Term Minimum
Rent by the increase in the consumer price index, subject to a
2% cap. For any year in which the increase is more than 2%, such
excess is applied to any prior or future year in which the
increase in the consumer price index was less than 2%.
The minimum rent payable at the commencement of the first LTC
Extended Term shall be the greater of (i) the previous
year's minimum rent increased by 2%, and (ii) the
minimum rent during the first lease year of the Initial Term
multiplied by a fraction, the numerator of which is the consumer
price index as of the commencement date of the first LTC
Extended Term and the denominator of which is the consumer price
index as of the LTC Initial Term commencement date. In no event
shall the minimum rent for the first year of the first LTC
Extended Term exceed 15% or more of the amount of minimum rent
at the end of the LTC Initial Term. The initial minimum rent
payable during the second LTC Extended Term shall be the greater
of (a) the minimum rent payable during the last
12 months of the previous LTC Extended Term increased by
2%, (b) the fair market rent as determined pursuant to the
terms of the LTC Master Leases, and (c) the minimum rent
during the first lease year of the first LTC Extended Term
multiplied by a fraction, the numerator of which is the consumer
price index as of the commencement date of the second LTC
Extended Term and the denominator of which is the consumer price
index as of the commencement date of the first LTC Extended
Term. In no event shall the minimum rent for the first year of
the second LTC Extended Term exceed by 15% or more the amount of
minimum rent at the end of the first LTC Extended
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Term. The minimum rent during any LTC Extended Term increases
annually in the same manner as during the LTC Initial Term.
LTC agreed to provide us (provided certain conditions were met)
with $2.5 million for capital expenditures over the three
year period following December 2003, and up to an additional
$2.5 million over the following three year period for
expansions of the LTC Properties. If such funds are advanced,
LTC Initial Term Minimum Rent will thereafter be increased by an
amount equal to 10% of all such funds advanced.
LTC Master Leases are triple net and we are responsible for the
payment of all taxes, assessments, utility expenses, insurance
premiums and other expenses relating to the operation of the LTC
Properties.
The LTC Master Leases prohibit any assignment of the
lessee's interest in the lease without LTC's consent.
In addition, the LTC Master Leases prohibit any change of
control without LTC's consent. A change of control includes
the following: (i) any change in the person which
ultimately exerts effective control over the management of the
affairs of the tenant under the LTC leases, or LTC Tenant (which
person is deemed to be the Company); (ii) any person or
persons is or becomes the beneficial owner, directly or
indirectly, of securities of LTC Tenant and/or the Company,
whether by operation of law or otherwise, representing thirty
percent (30%) or more of the combined voting power of the then
outstanding securities of LTC Tenant and/or the Company;
(iii) the stockholders of LTC Tenant or the Company approve
a merger or consolidation of LTC Tenant or the Company with any
other corporation, other than a merger or consolidation which
would result in the voting securities of LTC Tenant or the
Company (as applicable) which are outstanding immediately prior
thereto continuing to represent more than fifty percent (50%) of
the combined voting power of the voting securities of LTC Tenant
or the Company or such surviving entity immediately after such
merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of LTC
Tenant or the Company (or similar transaction) in which no
person acquires more than thirty percent (30%) of the combined
voting power of the then outstanding securities of LTC Tenant
and/or the Company shall not constitute a change of control; or
(iv) the stockholders of LTC Tenant or the Company approve
a plan of complete liquidation of LTC Tenant or the Company (as
applicable) or an agreement for the sale or disposition by LTC
Tenant or the Company of all or substantially all of the assets
of LTC Tenant or the Company, provided, a change of control
shall not constitute an event of default if at all times the
Company has an audited consolidated tangible net worth equal to
or greater than $150.0 million and has issued or
outstanding securities which are publicly traded on the New York
Stock Exchange, American Stock Exchange or NASDAQ. In addition,
upon the payment of certain waiver fees, the Company having a
net worth of between $50.0 million and $150.0 million
shall not constitute an event of default under the LTC Master
Lease.
We are obligated to comply with terms of all mortgages and have
the right (but not obligation) to cure LTC's defaults to a
mortgagee on behalf of LTC and to offset rental payments to LTC
by amounts expended.
Under two of the LTC Master Leases containing 25 of the
facilities, if LTC Tenant (or any of its affiliates) commits an
event of default under any other lease or sublease entered into
between LTC (or any of its affiliates) and the LTC Tenant (or
any of its affiliates), such event of default will be a default
under each respective LTC Master Lease. The other two LTC Leases
are not cross-defaulted against each other but are
cross-defaulted against the two LTC Master Leases containing the
25 facilities. In addition, a default pertaining to one facility
covered by an LTC Master Lease is a default with respect to all
facilities covered by such LTC Master Lease.
NHP's Master Lease Arrangement with Alterra
In April 2002, Alterra entered into a single master lease, or
the NHP Master Lease, with NHP and its affiliates with respect
to 57 facilities which included six facilities that were
previously leased by Alterra from Meditrust. Of the entire
original NHP-Alterra portfolio, six additional facilities were
not
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included in the master lease due to underlying ground leases or
bond related indebtedness, and Alterra is obligated to amend the
master lease to add such facilities when consents are obtained.
One of the six facilities was added to the NHP Master Lease in
June 2005. Since the time of entry into the master lease, six
facilities have been sold. As a result, 52 facilities, or
the NHP Properties, remain under the master lease. The Company
has guaranteed the payment and performance of all of
Alterra's obligations under the NHP Lease. Alterra is
required to maintain unrestricted cash and/or availability under
lines of credit or revolving loan agreements in the aggregate
amount of at least $10.0 million.
The NHP Master Lease expires on December 31, 2021, or the
NHP Initial Term. Alterra has two ten-year renewal options, each
a NHP Renewal Term, under the NHP Master Lease.
Alterra is obligated to pay, on a monthly basis, base rent, as
the same may be increased from time to time, the NHP Base Rent,
in an amount equal to approximately $20.0 million per annum
plus NHP Base Rent was to increase upon disbursements of any
subsequent amounts by NHP to Alterra to fund the cost of capital
improvements at the NHP Properties within three years of
April 9, 2002, as described in the NHP Master Lease, up to
$4.0 million, or the CapEx Funds. The rental increase would
be the product of (a) the amount of such CapEx Funds
disbursed, and (b) a percentage equal to the greater of
(i) 11.5% per annum and (ii) NHP's then
market lease rate, not to exceed 13% per annum. In
addition, Alterra is obligated to pay, on a quarterly basis,
additional rent, as the same may be increased from time to time,
the NHP Additional Rent, and together with the NHP Base Rent,
collectively, the NHP Rent, in an amount equal to 16% of the
amount by which gross revenues of the NHP Properties for the
applicable quarter exceed one-fourth of the gross revenues of
the NHP Properties for the 2002 calendar year for the initial
term. Base year for renewal terms is the first year of the
applicable renewal term. The current NHP Rent is
$20.4 million.
The NHP Base Rent increases at the beginning of each NHP Renewal
Term in an amount equal to the product of (a) 3.0% over the
ten year United States treasury rate as determined immediately
prior to the tenant's notice of election to renew and
(b) the greater of (i) the fair market value of the
NHP Properties on the date Alterra sent NHP notice of its
election to extend the term of the NHP Master Lease or
(ii) NHP's cost of acquiring the NHP Properties, which
was approximately $172.9 million, plus the CapEx Funds plus
any other amount for alterations or other amounts funded by NHP
in accordance with the NHP Master Lease, less any amount
received by NHP in connection with any sales of the NHP
Properties, NHP's receipt of condemnation proceeds in
connection with a public taking of a portion of any of the NHP
Properties or any other net capital proceeds received by NHP
with respect to any of the NHP Properties.
The total amount of NHP Rent paid in any year shall not be less
than the total amount of NHP Rent paid in the prior year. The
increase in the NHP Rent due during any year shall not exceed
more than 2.7% of the NHP Rent from the prior year other than in
connection with the first year of a NHP Renewal Term where the
increase in the NHP Rent shall not exceed 15% of the prior year.
To the extent the increase in the NHP Rent from one year to the
next would otherwise exceed 2.7%, such excess over 2.7% is
carried forward and applied to future years in which the rent
increases for such year would be below such capped amount. To
the extent that the increase in the NHP Rent in the first year
of an NHP Renewal Term would otherwise exceed 15%, such excess
over 15% is carried forward and evenly divided over the months
of the subsequent NHP Renewal Term to the extent the increase in
such subsequent renewal term is less than 15%.
Alterra is required to maintain with NHP cash and/or letters of
credit as a security deposit for the performance of its
obligations under the NHP Master Lease in an amount not less
than approximately $4.8 million. Tenant has an obligation
to replace cash with letters of credit when letters of credit
become available to Tenant on commercially reasonable terms.
NHP Rent is a net rent payable to NHP, with Alterra responsible
for the payment of all taxes, assessments, utility expenses,
insurance premiums and other expenses relating to the operation
of the NHP Properties. Alterra has covenanted to keep the NHP
Properties in good condition and
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repair. The NHP Master Lease also requires Alterra to make
annual expenditures at each NHP property to upgrade the NHP
Properties ranging between $150-$200 per unit, which amounts
will be increased annually by the percent increase in the
consumer price index.
Alterra is obligated to operate each of the NHP Properties in
compliance with a scheduled required bed count. Alterra may
permit, at any one time, the number of beds or living units, as
applicable, at no more than 30 individual NHP Properties (and
not in the aggregate) to be one bed or unit less than the
required bed count for such property.
A material default by Alterra or any affiliate of Alterra under:
(i) the letter of credit agreement, (ii) the NHP
Master Lease, the JER I Master Lease, the JER II Master Lease,
and the individual leases for Union Park, Albany, Forest Grove,
McMinnville, and Mt. Hood, or the NHP Designated Leases,
(iii) any other lease, agreement or obligation between
Alterra or any affiliate of Alterra and NHP or any of their
affiliates, which is not cured within any applicable cure period
specified therein or (iv) any other obligation which
affects the Premises which material default has not been waived
or cured in accordance with the applicable agreement shall
constitute a default under the NHP Master Lease. In addition,
any default pertaining to a single facility constitutes an event
of default with respect to all facilities covered by the NHP
Master Lease.
The NHP Master Lease prohibits the assignment of Alterra's
interest in the NHP Master Leases without NHP's consent.
There are no restrictions on changes of ownership in Company nor
restrictions on the Company's ability to merge or engage in
a business combination, so long as the Company has a
consolidated net worth equal to or greater than
$100.0 million and otherwise complies with any applicable
licensing requirements arising out of such change of ownership,
merger or business combination.
Alterra has agreed that during the term of the NHP Master Lease
and for one year thereafter, neither Alterra nor any of its
affiliates will, without the prior written consent of NHP,
(a) operate, own, participate in or otherwise receive
revenues from any other business providing services similar to
those at any of the NHP Properties within an eight mile radius
of each property, though Alterra and its affiliates may continue
to operate, own, manage, participate in or otherwise receive
revenues from certain expressly exempt facilities so long as no
aspects of the operations or management of such other facility
are changed in a manner that will result in the other facility
becoming more competitive with the NHP Properties;
(b) recommend or solicit the removal or transfer of any
residents or patients to any other facility owned or operated by
Alterra or its affiliates, unless necessary to provide an
alternate level of care not provided within the proximate NHP
Property; or (c) employ any management or supervisory
personnel working on or in connection with any portion of the
NHP Properties.
JER I's Master Lease Arrangement with Alterra
In April 2002, ALS Leasing, Inc. and Assisted Living Properties,
Inc, each wholly owned subsidiaries of Alterra, or the
JER I Tenant, entered into a single master lease, or the
JER I Master Lease, with JER I. The JER I Master Lease
currently covers 37 assisted living and memory care
properties, or the JER I Properties. Alterra agreed to
guaranty the payment of all amounts due by JER I Tenant
under the JER I Master Lease. The Company has guaranteed
the payment and performance of all of Alterra's obligations
under the JER I Master Lease. Alterra is required to
maintain unrestricted cash and/or availability under lines of
credit or revolving loan agreements in the aggregate amount of
at least $10.0 million.
The JER I Master Lease is for an initial term of
approximately 18 years and expires on December 31,
2020, or the JER I Initial Term. JER I Tenant has two
ten-year renewal options, each a JER I Renewal Term, under
the JER I Master Lease.
The JER I Tenant is obligated to pay an initial term base
rent, or the JER I Initial Term Base Rent, of approximately
$10.8 million per annum (which represents JER I's
original investment in the
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JER I Properties of approximately $96.4 million (as
reduced to approximately $94.4 million based upon the
consummation of the sale of six properties and as the same may
be further increased or decreased pursuant to the terms of the
JER I Master Lease), or JER I's Investment, multiplied
by a rate of 11.5%, or the Initial Term Base Rate, as the same
is increased each year as provided below). Concurrently with any
adjustment to JER I's Investment, the base rent for the
balance of the applicable lease year and term is recalculated
and reset based on such adjustment.
The JER I Initial Term Base Rate increases at the beginning
of each year in an amount equal to the Initial Term Base Rate
plus the increase in the consumer price index (as calculated
pursuant to the terms of the lease) not to exceed .30% for the
first four lease years and .25% for the 5th lease year and
each lease year thereafter during the JER I Initial Term.
The current Initial Term Base Rate is 12.40% and the JER I
Initial Term Base Rent payable is approximately
$11.1 million.
Renewal term base rent, or the JER I Renewal Term Base
Rent, shall be in an annual amount equal to the product of the
greater of (a) (i) JER I's Investment in the
JER I Properties on the exercise date of such JER I
Renewal Term and (ii) the fair market value of the
JER I Properties on such date and (b) 629 basis
points over the ten-year U.S. treasury rate in effect on
the exercise date, or the JER I Renewal Term Base Rate. The
JER I Renewal Term Base Rate shall increase at the
beginning of each year in an amount equal to the JER I
Renewal Term Base Rate in effect in the immediately preceding
lease year plus the increase in the consumer price index not to
exceed .25% in any year. In no event shall the JER I
Renewal Term Base Rent for the first lease year of any
JER I Renewal Term exceed 125% or be less than 100% of the
base rent due for the last lease year of the JER I Initial
Term or the preceding JER I Renewal Term.
JER I Tenant is also required to pay amounts due and
payable in connection with the financing of the Wynwood of
Manlius property directly to JER I 's lender. Any
amounts paid by JER I Tenant in any calendar month in
connection with the Manlius Property financing are credited
against the amount of JER I Initial Term Base Rent payable
in such month provided certain conditions are met.
JER I Tenant is required to make monthly escrows of taxes
equal to 1/12 of the estimated annual taxes due and make monthly
escrow payments for a capital expenditure reserve in an amount
equal to 1/12 of (i) $250 (as adjusted each year for
increases in the consumer price index (as calculated pursuant to
the terms of the lease), multiplied by (ii) the aggregate
number of living units or beds in all of the JER I
Properties on the date the payment is due. Both the tax escrow
and the capital expenditure reserve are held by JER I in
interest bearing accounts. JER I retains amounts remaining
in the capital expenditure reserve at the expiration or earlier
termination of the term as supplemental rent. There is no
requirement for an insurance escrow.
JER I Tenant shall maintain with JER I the amount of
approximately $2.7 million, comprised of approximately
$2.5 million of cash and $243,200 represented by letters of
credit, as a security deposit for the performance of JER I
Tenant's obligations under the JER I Master Lease.
Tenant has an obligation to replace cash with letters of credit
when letters of credit become available to Tenant on
commercially reasonable terms. All interest earned on the cash
portion of the security deposit is added to and becomes a part
of the capital expenditure reserve.
If at any time the coverage ratio, which is the ratio of
(i) the net income of JER I Tenant for any applicable
fiscal quarter, adjusted to add interest expenses, income tax
expenses, depreciation and amortization expenses, rental
expenses, and management fee expenses to (ii) the amount of
minimum rent for the JER I Properties and debt service due
with respect to the Manilus property payable for any applicable
fiscal quarter, falls below 1.4:1.0, and there is any material
suspension, termination or restriction placed upon the
JER I Tenant or the JER I Properties that continues
for more than 60 days, or a Sixty Day Inference, such event
shall constitute an event of default under the JER I Master
Lease.
JER I Tenant is obligated to operate each of the JER I
Properties in compliance with a scheduled required bed count.
JER I Tenant may permit, at any one time, the number of
beds or
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units at no more than 20 individual JER I Properties (and
not in the aggregate) to be one bed or unit less than the
required bed count for such property. JER I Tenant shall
not allow the average occupancy for any trailing three month
period to (i) drop below 40% of the required unit/bed count
for more than 4 properties if the coverage ratio is less
than 1.0:1.0 or (ii) allow the overall occupancy for the
entire portfolio to be less than 65% of the required unit/bed
count.
A default by JER I Tenant or any guarantor or any affiliate
of either under (i) the documents applicable to the
JER I Portfolio (e.g., the guaranty, letter of credit
agreement and stock pledge agreement), (ii) the NHP
Designated Leases, (iii) any other lease, agreement or
obligation between JER I Tenant or any guarantor or any
affiliate of either and JER I or any of its affiliates,
which is not cured within any applicable cure period specified
therein, or (iv) any other obligation in excess of
$1.0 million under any other lease or financing agreement
with any other party and with respect to which such party has
accelerated such obligation or has otherwise exercised any
material remedy as a result of such material default that has
not been cured or waived, shall constitute an event of default
under the JER I Master Lease. In addition, any default
pertaining to a single facility constitutes an event of default
with respect to all facilities covered by the JER I Master
Lease.
Upon (a) the failure to perform or comply with the
provisions of, or a breach or default under, the section of the
JER I Master Lease relating to regulatory compliance (a
loss of licensure), (b) the closure of any material portion
of the business, (c) the sale or transfer of all or any
portion of any certificate of need, bed rights or other similar
certificate or license relating to any portion of the business
or properties, (d) the use of any portion of the JER I
Properties other than for a licensed facility engaged in the
applicable business and for ancillary services relating thereto,
or (e) a Sixty Day Inference occurs JER I shall have
the right to put, or the PUT, the applicable JER I Property
to the JER I Tenant and/or petition any appropriate court
for the appointment of a receiver to manage the operation of the
JER I Property. If JER I exercises the PUT, JER I
Tenant shall purchase the applicable portion of the JER I
Property from JER I for a cash price equal to the greater
of (a) JER I's investment with respect to such
property plus the product of JER I's investment and
the current JER I Initial Term applicable rate or
JER I Renewal Term applicable rate, as applicable, and
(b) fair market value on the date of JER I's
exercise of the PUT without taking into account the event of
default, plus, in either case, all of JER I's costs
and expenses related to the PUT.
JER I Master Lease is triple net with JER I Tenant
responsible for the payment of all taxes, assessments, utility
expenses, insurance premiums and other expenses relating to the
operation of the JER I Properties. JER I is
responsible for certain maintenance costs at the JER I
Properties.
The JER I Master Lease prohibits the assignment of
JER I Tenant's interest in the JER I Master Lease
without JER I's consent. There are no restrictions on
changes of ownership in the Company nor restrictions on the
Company's ability to merge or engage in a business
combination, so long as the Company has a consolidated net worth
equal to or greater than $100.0 million and otherwise
complies with any applicable licensing requirements arising out
of such change of ownership, merger or business combination.
JER I Tenant and Alterra have agreed that during the term
of the JER I Master Lease and for one year thereafter,
neither JER I Tenant, Alterra nor any of their affiliates
will (i) operate, own participate in or otherwise receive
revenues from any other business providing services similar to
those at any of the JER I Properties within an eight mile
radius of each property, though JER I Tenant and their
affiliates may continue to operate, own, manage, participate in
or otherwise receive revenues from certain expressly exempt
facilities so long as no aspects of the operations or management
of such other facility are changed in a manner that will result
in the other facility becoming more competitive with the
JER I Properties, (ii) recommend or solicit the
removal or transfer of any residents or patients to any other
facility owned or operated by the JER I Tenant or its
affiliates, unless necessary to provide an alternate level of
care not provided within the proximate JER I Property, or
(iii) employ any management or supervisory personnel
working on or in connection with any portion of the JER I
Properties.
107
JER II's Master Lease Arrangement with
Alterra
In October 2002, JER II leased nine residences to ALS
Leasing, Inc., or JER II Tenant, in a single master lease,
or the JER II Master Lease. The JER II Master Lease is
for an initial term of approximately 18 years and expires
on December 31, 2020, or the JER II Initial Term.
JER II Tenant has two ten-year renewal options, each a
JER II Renewal Term, under the JER II Master Lease.
The Company has guaranteed the payment and performance of all of
Alterra's obligations under the JER II Master Lease.
Alterra is required to maintain unrestricted cash and/or
availability under lines of credit or revolving loan agreements
in the aggregate amount of at least $10.0 million.
The JER II Tenant is obligated to pay an initial term base
rent, or the JER II Initial Term Base Rent, of
approximately $3.2 (which represents JER II's original
investment in the JER II Properties of approximately
$28.8 million multiplied by a rate of 11.5%, (or the
Initial Term Base Rate), decreased by $0.4 million (and as
the same may be further increased or decreased pursuant to the
terms of the JER II Master Lease), or JER II's
Investment, as the same is increased each year as provided
below). The $750,000 security deposit is included in
JER II's original investment until the JER II
Tenant fully funds the security deposit. JER II Tenant has
an obligation to replace cash with letters of credit when
letters of credit become available to Tenant on commercially
reasonable terms. All interest earned on the cash security
deposit is added to and becomes a part of the capital
expenditure reserves. Concurrently with any adjustment to
JER II's Investment, the base rent for the balance of
the applicable lease year and term is recalculated and reset
based on such adjustment.
The JER II Initial Term Base Rate increases at the
beginning of each year in an amount equal to the Initial Term
Base Rate plus the increase in the consumer price index (as
calculated pursuant to the terms of the Lease) not to exceed
..30% for the first four lease years, and .25% for the fifth
lease year and each lease year thereafter during the JER II
Initial Term. The current Initial Term Base Rate is 12.4% and
the JER II Initial Term Base Rent payable is
$3.6 million.
Renewal term base rent, or JER II Renewal Term Base Rent,
shall be in an annual amount equal to the product of
(a) the greater of (i) JER II's Investment
in the JER II Properties on the exercise date of such
JER II Renewal Term and (ii) the fair market value of
the JER II properties on such date, and
(b) 788 basis points over the ten-year
U.S. treasury rate in effect on the exercise date, or the
JER II Renewal Term Base Rate. The JER II Renewal Term
Base Rate shall increase at the beginning of each year in an
amount equal to the JER II Renewal Term Base Rate in effect
in the immediately preceding lease year plus the increase in the
consumer price index (as calculated pursuant to the terms of the
Lease), not to exceed .25% in any year. In no event shall the
JER II Renewal Term Base Rent for the first lease year of
any JER II Renewal Term exceed 125% or be less than 100% of
the base rent due for the last lease year of the JER II
Initial Term or the preceding JER II Renewal Term.
Upon execution of the JER II Master Lease, JER II
Tenant deposited $103,022 in a tax escrow with JER II.
JER II Tenant is required to make monthly escrows of taxes
in an amount equal to 1/12 of the estimated annual taxes due and
JER II Tenant is required to make monthly escrow payments
for a capital expenditure reserve in an amount equal to 1/12 of
(i) $250 (as adjusted each year for increases in the
consumer price index), multiplied by (ii) the aggregate
number of living units or beds in all of the JER II
Properties on the date the payment is due. Both the tax escrow
and the capital expenditure reserve are held by JER II in
interest bearing accounts. JER II retains amounts remaining
in the capital expenditure reserve at the expiration or earlier
termination of the term as supplemental rent. There is no
requirement for insurance escrows.
If at any time the coverage ratio (which is the ratio of
(i) the net income of JER II Tenant for any applicable
fiscal quarter, adjusted to add interest expenses, income tax
expenses, depreciation and amortization expenses, rental
expenses, and management fee expenses, to (ii) the amount
of minimum rent payable for any applicable fiscal quarter, falls
below 1.4:1.0 and there is any material suspension, termination
or restriction placed upon the JER II Tenant or the
JER II Properties that
108
continues for more than 60 days (a "Sixty Day
Inference"), such event shall constitute an event of
default under the JER II Master Lease.
JER II Tenant is obligated to operate each of the
JER II Properties in compliance with a scheduled required
bed count. JER II Tenant may permit at any one time the
number of beds at no more than an aggregate of five individual
JER II Properties to be one bed less than the required bed
count for such property. JER II Tenant shall not
(i) allow the average occupancy for any trailing three
month period to drop below 40% of the required bed count for
more than two properties if the debt service coverage ratio is
less than 1.0:1.0, or (ii) allow the overall occupancy for
the entire portfolio to be less than 65% of the required bed
count.
The following shall constitute an event of default under the
JER II Master Lease: (i) a default under the NHP
Designated Leases or the Purchase and Sale Agreement among
JER II, ALS Holdings, Inc. and ALS National, Inc. prior to
closing, (ii) a default by the JER II Tenant or any
guarantor or any affiliate under the documents applicable to the
JER II Portfolio (e.g., the letter of credit agreement,
guaranty and stock pledge agreement), (iii) a default by
JER II Tenant or any guarantor or any affiliate under any
other lease, agreement or obligation between JER II Tenant
or any guarantor or any affiliate thereunder and JER II or
any of its affiliates (including the Purchase Agreement with
respect to any default by ALS Holdings, Inc. and ALS National,
Inc., which is not cured within any applicable cure period
specified therein), or (iv) a default by JER II Tenant or
any guarantor or any affiliate under any obligation in excess of
$1.0 million under any other lease or financing agreement
with any other party and with respect to which such party has
accelerated such obligation or has otherwise exercised any
material remedy as a result of such material default that has
not been cured or waived. In addition, any default pertaining to
a single facility constitutes an event of default with respect
to all facilities covered by the JER II Master Lease.
Upon (a) the failure to perform or comply with the
provisions of, or a breach or default under the JER II
Master Lease section regarding regulatory compliance (loss of
licensure), (b) the closure of any material portion of the
business, (c) the sale or transfer of all or any portion of
any certificate of need, bed rights or other similar certificate
or license relating to any portion of the business or
properties, (d) the use of any portion of the JER II
Properties other than for a licensed facility engaged in the
applicable business and for ancillary services relating thereto
or (e) a Sixty Day Inference occurs JER II shall
have the right to put, or PUT, the applicable JER II
Property to the JER II Tenant and/or petition any
appropriate court for the appointment of a receiver to manage
the operation of the JER II Property. If JER II
exercises the PUT, JER II Tenant shall purchase the
applicable portion of the JER II Property from JER II
for a cash price equal to the greater of (A) JER I's
investment with respect to such property plus the product of
JER II's investment and the current JER II
Initial Term applicable rate or JER II Renewal Term
applicable rate, as applicable, and (B) fair market value
on the date of JER II's exercise of the PUT without
taking into account the event of default, plus, in either case,
all of JER II's costs and expenses related to the PUT.
The JER II Master Lease is triple net with JER II
Tenant responsible for the payment of all taxes, assessments,
utility expenses, insurance premiums and other expenses relating
to the operation of the JER II Properties. JER II is
responsible for certain maintenance costs at the JER II
Properties.
The JER II Master Lease prohibits the assignment of JER I
Tenant's interest in the JER II Master Lease without
JER II's consent. There are no restrictions on changes
of ownership in the Company nor restrictions on the
Company's ability to merge or engage in a business
combination, so long as the Company has a consolidated net worth
equal to or greater than $100.0 million and otherwise
complies with any applicable licensing requirements arising out
of such change of ownership, merger or business combination.
JER II Tenant and Alterra have a purchase option with
respect to all, but not part, of the JER II Properties in
the tenth year of the JER II Initial Term for a purchase
price equal to the product of
109
JER II's Investment on the closing date and the
JER II Initial Term Base Rate to be in effect in the
eleventh lease year, divided by 9%.
JER I Tenant and Alterra have agreed that during the term of the
JER II Master Lease and for one year thereafter, neither
JER I Tenant, Alterra nor any of their affiliates will
(i) operate, own, participate in or otherwise receive
revenues from any other business providing services similar to
those at any of the JER II Properties within an eight mile
radius of each property, though JER II Tenant and their
affiliates may continue to operate, own, manage, participate in
or otherwise receive revenues from certain expressly exempt
facilities so long as no aspects of the operations or management
of such other facility are changed in a manner that will result
in the other facility becoming more competitive with the
JER II Properties; (ii) recommend or solicit the
removal or transfer of any residents or patients to any other
facility owned or operated by the JER II Tenant or its
affiliates, unless necessary to provide an alternate level of
care not provided within the proximate JER II Property; or
(iii) employ any management or supervisory personnel
working on or in connection with any portion of the JER II
Properties.
110
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information about our
directors and executive officers as of the consummation of this
offering, together with their positions and ages. Each of our
executive officers holds office until his or her successor is
duly elected or appointed and qualified or until his or her
death, retirement, resignation or removal, if earlier. The
persons listed below will serve as officers of Brookdale as of
the consummation of this offering. Each of our directors holds
office until his or her successor is duly elected or appointed
and qualified or until his or her death, retirement,
disqualification, resignation or removal, if earlier.
Name
Age
Position
Wesley R. Edens
43
Chairman of the Board of Directors
Mark J. Schulte
51
Chief Executive Officer
Mark W. Ohlendorf
45
Co-President
John P. Rijos
52
Co-President
R. Stanley Young
53
Executive Vice President and Chief
    Financial Officer
Kristin A. Ferge
32
Executive Vice President and
    Treasurer
Deborah C. Paskin
53
Executive Vice President, Secretary
    and General Counsel
William B. Doniger
39
Vice Chairman
Randal A. Nardone
50
Director
Wesley R. Edens
is the Chairman of our board of directors
and has served in this capacity since August 2005.
Mr. Edens has been a Principal and the Chairman of the
Management Committee of Fortress Investment Group LLC since
co-founding the firm in May 1998. As Chairman of the Management
Committee of Fortress Investment Group, he manages and invests
in other asset-related investment vehicles and serves on the
boards of Fortress Registered Investment Trust and Fortress
Investment Trust II. He is the Chairman of the board of
directors and Chief Executive Officer of Newcastle Investment
Corp., an affiliate of Fortress and a REIT listed on the New
York Stock Exchange. He has also served as a director and the
Chief Executive Officer of Eurocastle Investment Limited, an
affiliate of Fortress which is listed on the London Stock
Exchange, since its inception in 2003, and previously served as
the Chairman of Eurocastle's board of directors.
Mr. Edens has also served as Chairman of the board of
directors of Global Signal Inc. since its reorganization in
October 2002 and as its Chief Executive Officer since February
2004. He also serves as the Chairman of the board of directors
of Mapeley Limited. In addition, Mr. Edens served as a
director of Capstead Mortgage Corporation beginning in December
1999 and assumed the title of Chairman of the Board, Chief
Executive Officer and President in April 2000 until July 2003
when he resigned from all positions. Mr. Edens was the head
of Global Principal Finance at Union Bank of Switzerland from
May 1997 to May 1998. Prior to joining Union Bank of
Switzerland, Mr. Edens was a Partner and a Managing
Director of BlackRock Financial Management Inc. from October
1993 to May 1997. In addition, Mr. Edens was a Partner and
Managing Director of Lehman Brothers from April 1987 to October
1993. Mr. Edens received a Bachelor of Science in Finance
from Oregon State University.
Mark J. Schulte
became our Chief Executive Officer in
August 2005. Previously, Mr. Schulte served as Chief
Executive Officer and director of BLC since 1997, and was also
Chairman of the board from September 2001 to June 2005. From
January 1991 to May 1997, he was employed by BLC's
predecessor company, The Prime Group, Inc., in its Senior
Housing Division, most recently serving as its Executive Vice
President, with primary responsibility for overseeing all
aspects of Prime's Senior Housing Division.
Mr. Schulte has 25 years of experience in the
development and operation of multi-family housing, senior
housing, senior independent and assisted living and health
111
care facilities. He is a former Chairman of ASHA and remains on
ASHA's board of directors. Mr. Schulte received a B.A.
in English and a J.D. from St. Louis University, and is
licensed to practice law in the State of New York.
Mark W. Ohlendorf
became our Co-President in August 2005.
Mr. Ohlendorf has also served as Chief Executive Officer
and President of Alterra since December 2003. From January 2003
through December 2003, Mr. Ohlendorf served as Chief
Financial Officer and President of Alterra, and from 1999
through 2002 he served as Senior Vice President and Chief
Financial Officer. Mr. Ohlendorf has over 20 years of
experience in the health care and long-term care industries,
having held leadership positions with such companies as Sterling
House Corporation, Vitas Healthcare Corporation and Horizon/ CMS
Healthcare Corporation. He is a member of the board of directors
of the Assisted Living Federation of America (ALFA) and ASHA. He
received a B.A. in Political Science from Illinois Wesleyan
University, and is a certified public accountant.
John P. Rijos
became our Co-President in August 2005.
Previously, Mr. Rijos served as President, Chief Operating
Officer and director of BLC since August 2000. Prior to joining
BLC in August 2000, Mr. Rijos spent 16 years with Lane
Hospitality Group, owners and operators of over 40 hotels and
resorts, as its President and Chief Operating Officer. From 1981
to 1985 he served as President of High Country Corporation, a
Denver-based hotel development and management company. Prior to
that time, Mr. Rijos was Vice President of Operations and
Development of several large real estate trusts specializing in
hotels. Mr. Rijos has over 25 years of experience in
the acquisition, development and operation of hotels and
resorts. He received a B.S. in Hotel Administration from Cornell
University and serves on many tourist-related operating boards
and committees, as well as advisory committees for Holiday Inns,
Sheraton Hotels and the City of Chicago and the Board of
Trustees for Columbia College. Mr. Rijos is a certified
hospitality administrator.
R. Stanley Young
became our Executive Vice President
and Chief Financial Officer in August 2005. Previously,
Mr. Young served as Executive Vice President, Chief
Financial Officer and Treasurer of BLC since December 1999. From
August 1998 to December 1999, Mr. Young was Senior Vice
President — Finance and Treasurer of BLC. From 1977 to
1998, Mr. Young practiced public accounting with KPMG LLP,
where he was admitted to the partnership in 1987. Mr. Young
received a B.A. in Business Administration from Illinois
Wesleyan University, an MBA from the University of Illinois, and
is a certified public accountant.
Kristin A. Ferge
became our Executive Vice President and
Treasurer in August 2005. Ms. Ferge has also served as Vice
President, Chief Financial Officer and Treasurer of Alterra
since December 2003. From April 2000 through December 2003,
Ms. Ferge served as Alterra's Vice President of
Finance and Treasurer. Prior to joining Alterra, she worked in
the audit division of KPMG LLP. Ms. Ferge received a B.A.
in Accounting from Marquette University, an MBA from the
University of Wisconsin, and is a certified public accountant.
Deborah C. Paskin
became our Executive Vice President,
Secretary and General Counsel in August 2005. Previously,
Ms. Paskin served as Senior Vice President, Secretary and
General Counsel of BLC since November 2002. Prior to joining
BLC, from 1999 to 2002, she served as Chief Administrative
Officer, Executive Vice President and General Counsel for Clark
Retail Enterprises, Inc. Prior to that time, she served as
General Counsel for two other Chicago-based companies,
Dominick's Finer Foods, Inc. and Helene Curtis, Inc. Prior
to that, Ms. Paskin practiced law in the Chicago office of
Latham & Watkins. Ms. Paskin graduated from
Northwestern University School of Law. She also received a
Masters Degree in Library Science from Dominican University and
a B.A. in English from Indiana University in Bloomington,
Indiana.
William B. Doniger
became our Vice Chairman in August
2005. Mr. Doniger is a managing director of Fortress and
oversees United States acquisitions. He joined Fortress in May
1998, prior to which he worked at UBS and, from January 1996
through December 1997, at BlackRock. Prior to
112
that, Mr. Doniger was in the structured finance group of
Thacher Proffitt & Wood. Mr. Doniger received an
A.B. in History from Princeton University and a J.D. from
American University.
Randal A. Nardone
became a member of our board of
directors in June 2005. Mr. Nardone has been a principal
and a member of the Management Committee of Fortress since
co-founding the firm in 1998. Mr. Nardone oversees
Fortress's structured finance and legal matters. Prior to
joining Fortress, Mr. Nardone was a managing director of
UBS from May 1997 to May 1998, and, prior to that, was a
principal of BlackRock Financial Management Inc. In addition,
Mr. Nardone was a partner and a member of the executive
committee at the law firm of Thacher Proffitt & Wood,
which he joined in 1980, and ran the structured finance group
starting in 1993. Mr. Nardone received a B.A. in English
and Biology from the University of Connecticut and a J.D. from
the Boston University School of Law.
Pursuant to our amended and restated certificate of
incorporation and amended and restated by-laws, our board of
directors is divided into three classes of directors. The
current terms of the Class I, Class II and
Class III directors will expire in 2008, 2007 and 2006,
respectively. As
of                     ,
2005,
Messrs.                           served
as a Class I director,
Messrs.                                                   served
as a Class II director and
Messrs.                           served
as a Class III director. Directors of each class are chosen
for three-year terms upon the expiration of their current terms
and each year one class of directors will be elected by the
stockholders. Our amended and restated by-laws provide that our
board of directors may determine by resolution the number of
directors which constitute our board of directors. On
August 8, 2005, the board of directors set the number of
directors which constitutes our board at three, none of whom
have been determined to be "independent," as defined
under NYSE rules. We plan to have seven directors, at least
four of whom will be determined to be "independent" as
defined under NYSE rules. All officers serve at the discretion
of our board of directors.
Committees of the Board of Directors
Prior to the consummation of this offering, we will establish
the following committees of our board of directors:
Audit Committee
The audit committee:
•
reviews the audit plans and findings of our independent
    registered public accounting firm and our internal audit and
    risk review staff, as well as the results of regulatory
    examinations, and tracks management's corrective action
    plans where necessary;
•
reviews our financial statements, including any significant
    financial items and/or changes in accounting policies, with our
    senior management and independent registered public accounting
    firm;
•
reviews our risk and control issues, compliance programs and
    significant tax and legal matters;
•
has the sole discretion to appoint annually our independent
    registered public accounting firm, evaluate its independence and
    performance and set clear hiring policies for employees or
    former employees of the independent registered public accounting
    firm; and
•
reviews our risk management processes.
The members of the committee have not yet been appointed, We
intend to appoint at least three members that are
"independent" directors as defined under NYSE rules
and Rule 10A-3 of the Exchange Act.
113
Nominating and Corporate Governance Committee
The nominating and corporate governance committee:
•
reviews the performance of our board of directors and makes
    recommendations to the board regarding the selection of
    candidates, qualification and competency requirements for
    service on the board and the suitability of proposed nominees as
    directors;
•
advises the board with respect to the corporate governance
    principles applicable to Brookdale; and
•
oversees the evaluation of the board and Brookdale's
    management.
The members of the committee have not yet been appointed. We
intend to appoint at least three members that are
"independent" directors as defined under the NYSE
rules.
Compensation Committee
The compensation committee:
•
reviews and recommends to the board the salaries, benefits and
    stock option and other equity-related grants for all employees,
    consultants, officers, directors and other individuals we
    compensate;
•
reviews and approves corporate goals and objectives relevant to
    Chief Executive Officer compensation, evaluates the Chief
    Executive Officer's performance in light of those goals and
    objectives, and determines the Chief Executive Officer's
    compensation based on that evaluation; and
•
oversees our compensation and employee benefit and incentive
    compensation plans.
The members of the committee have not yet been appointed. We
intend to appoint at least three members that are
"independent" directors as defined under the NYSE
rules.
Compensation Committee Interlocks and Insider
Participation
Compensation decisions during the year ended December 31,
2004 pertaining to executive officer compensation were made:
with respect to BLC, by Fortress and Health Partners, following
recommendation by Mark J. Schulte, our chief executive
officer; and with respect to Alterra, by Fortress, following
recommendation by Mark W. Ohlendorf, our co-president. We
have entered into certain transactions with Fortress as
described in "Certain Relationships and Related Party
Transactions."
Compensation of Directors
We will pay an annual fee to each independent director equal to
$          ,
payable semi-annually. In addition, an annual fee of
$          will
be paid to the chairs of each of the audit and compensation
committees of the board of directors. Fees to independent
directors may be made by issuance of common stock, based on the
value of such common stock at the date of issuance, rather than
in cash, provided that any such issuance does not prevent such
director from being determined to be independent and such stock
is granted pursuant to a stockholder-approved plan or the
issuance is otherwise exempt from any applicable stock exchange
listing requirement. Affiliated directors, however, will not be
separately compensated by us. All members of the board of
directors will be reimbursed for reasonable costs and expenses
incurred in attending meetings of our board of directors.
Following the consummation of this offering, each independent
director will be eligible to receive awards of our shares of
common stock as described in "Equity Incentive
Plans — Omnibus Stock Incentive Plan."
114
Executive Officer Compensation
The following summary compensation table sets forth information
concerning the cash and non-cash compensation earned by, awarded
to or paid to our Chief Executive Officer and our four other
most highly compensated executive officers (with their current
positions with us) for services rendered to BLC and Alterra, as
applicable, in 2004. We refer to these executives as our
"named executive officers" in other parts of this
prospectus.
Summary Compensation Table
Annual Compensation
Other Annual
All Other
Fiscal
Salary
Bonus
Compensation
Compensation(1)
Name and Principal Position
Year
($)
($)
($)
($)
Mark J. Schulte, Chief Executive
    Officer
2004
390,150
774,588
—
3,250
Mark W. Ohlendorf, Co-President
2004
395,186
318,800
—
27,050
(2)
John P. Rijos, Co-President
2004
364,140
774,588
—
3,250
R. Stanley Young, Executive Vice
    President and Chief Financial Officer
2004
260,100
649,776
—
3,250
Kristin A. Ferge, Executive Vice
    President and Treasurer
2004
215,922
115,900
—
2,050
Deborah C. Paskin, Executive Vice
    President, Secretary and General Counsel
2004
255,000
316,319
—
—
(1)
Unless indicated otherwise, represents the employer matching
    contribution to the 401(k) plan.
(2)
Representing a contribution of $25,000 in the form of premiums
    for a split dollar life insurance policy and $2,050 as the
    employer matching contribution to the 401(k) plan.
Equity Incentive Plans
Employee Restricted Stock Plans
BLC and FEBC-ALT Investors adopted substantially similar
employee restricted securities plans, or the Restricted
Securities Plans, effective as of August 5, 2005, to
attract, motivate and retain key employees. The Restricted
Securities Plans provide for the grant to those participants
selected by Alterra's and BLC's respective boards of
directors, of shares of common stock, in the case of the BLC
plan, and LLC membership interests, in the case of the FEBC-ALT
Investors plan, that are in either case subject to substantial
risk of forfeiture until the occurrence of certain events, as
specified in the applicable restricted securities award
agreements. As a condition for receiving an award under the
Restricted Securities Plans, each participant has entered into
an employment agreement and/or securities agreement to the
extent required by the applicable employer.
BLC reserved for issuance under its plan 1,000 shares of
its common stock and FEBC-ALT Investors has authorized for
issuance up to 3.33% of its membership interests (such shares of
BLC common stock and such FEBC-ALT Investors membership
interests, collectively, the "Securities"), in each
case, subject to equitable adjustment upon the occurrence of
certain corporate transactions or events. Upon the completion of
the series of formation transactions described in
"Business — History," pursuant to the terms
of the Restricted Securities Plans, all shares of BLC common
stock and FEBC-ALT membership interests, including the
securities subject to outstanding grants under the plans, were
automatically converted into shares of our common stock. The
vesting schedules of outstanding awards under the plans
continued in effect, except that service with us or any
surviving or continuing entity will be deemed to be continued
service with Alterra or BLC for purposes of these awards.
Each participant's award was granted pursuant to the terms
of a restricted securities award agreement which set forth the
amount of securities subject to the award, the applicable
vesting schedules and the restrictive covenants by which the
participant would be bound. Messrs. Schulte, Rijos and Young and
Ms. Paskin received all of the rights of a BLC stockholder,
including the right to
115
receive dividends and to vote the shares. Mr. Ohlendorf and
Ms. Ferge were considered members of FEBC-ALT Investors and
had the rights of membership as set forth in the LLC Agreement,
which included the right to receive distributions with respect
to the interests but not the right to vote, until the completion
of the merger transactions described in
"Business — History." Unless otherwise
provided in an award agreement, if the participant's
employment is terminated for any reason, the Messrs. Schulte,
Rijos and Young and Ms. Paskin portion of the award subject
to a substantial risk of forfeiture as of the date of
termination would be forfeited. In accordance with the terms of
the plans, a portion of these securities will no longer be
subject to a risk of forfeiture upon the consummation of this
offering. In addition, the remaining securities will vest over a
five-year period following the issuance if the executive remains
continuously employed by the Company. Securities that are
subject to a risk of forfeiture may not be sold or transferred.
In connection with the issuance on August 5, 2005 of
988 shares of stock of BLC and 3.33% of the membership
interests of FEBC-ALT Investors to certain executives pursuant
to their respective Restricted Securities Plans, BLC, Alterra
and FEBC-ALT Investors received valuation letters from an
independent firm, calculated based upon the non-marketable,
minority interest characteristics of these securities as of the
date of such letters. The valuation letter delivered to BLC
indicated a non-marketable, minority interest basis equity value
per share of $12,416 per share. The valuation letter delivered
to Alterra and FEBC-ALT Investors indicated a non-marketable,
minority interest basis equity value of $1.2 million per 1%
interest in Alterra.
The aggregate value of these securities at the date of issuance,
based on this valuation, was $16.3 million. In arriving at
the value of these securities, the independent firm was directed
not to reflect any potential cost savings or synergies relating
to the merger transactions or any premium relating to any
potential initial public offering of our common stock. These
securities were exchanged in the merger transactions for an
aggregate of 2,577,652 shares of the Company. The aggregate
value of these shares based upon the midpoint of the price range
set forth on the cover page of this prospectus is
$          .
The Restricted Securities Plans are administered by our board of
directors, which has full power to construe and interpret the
plans and any outstanding awards, including, without limitation,
to determine whether, to what extent, and under what
circumstances an award may be settled, canceled, forfeited,
exchanged, or surrendered, to remedy any ambiguities and
inconsistencies in the plans, to prescribe, amend and rescind
rules and regulations relating to the plans, and to make all
other determinations deemed necessary or advisable for the
administration of the plans.
No securities granted under the Restricted Securities Plans may
be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of prior to the consummation of an
"initial public offering," as defined in the
Restricted Securities Plans and which would include this
offering. Unvested securities subject to awards may not be sold,
assigned, transferred, pledged, hypothecated or otherwise
disposed of and shall be subject to a risk of forfeiture until
such securities become vested. Moreover, to the extent required
by us, the participant may not transfer any securities acquired
pursuant to the Restricted Securities Plans for a period of
180 days following the closing of an initial public
offering, or such longer or shorter period of time as may be
reasonably requested by an underwriter in connection with such
offering.
FEBC-ALT Investors and BLC may amend or terminate their
respective Restricted Securities Plan at any time for any or no
reason; provided, however, that no amendment that requires the
approval of its equity holders under applicable Delaware law
will be effective unless the same shall be approved by the
requisite vote and, subject to adjustments in the event of
certain changes in its capitalization, BLC and FEBC-ALT
Investors may not adversely affect the rights of participants
with respect to awards previously granted under the Restricted
Securities Plans. Unless sooner terminated, the Restricted Stock
Plans will automatically terminate on the tenth anniversary of
their effective date.
116
Under the terms of the restricted stock agreements, employees of
Alterra and BLC received bonuses in connection with their
restricted securities awards, as described below.
Participants under FEBC-ALT Investors Restricted Securities Plan
who made timely elections pursuant to section 83(b) of the
Internal Revenue Code with respect to their awards received cash
bonuses sufficient, on an after tax basis, to cover
Alterra's withholding obligations with respect to up to
100% of the membership interests subject to these awards, and
the bonuses were used solely for purposes of paying these tax
obligations.
Participants under BLC's Restricted Securities Plan who
made timely elections pursuant to section 83(b) of the
Internal Revenue Code received cash bonuses sufficient, on an
after tax basis, to cover BLC's withholding obligations
with respect to their awards for those shares (a) with
respect to which the forfeiture restrictions will lapse upon
consummation of an initial public offering (which includes this
offering) and (b) for which the participants had made such
timely elections, and such bonuses were used solely for the
purposes of paying these tax obligations.
On                     ,
2005, the following executives of Alterra received grants of the
following amounts of restricted FEBC-ALT Investors membership
interests:
Mark W. Ohlendorf
1.67
%
Kristin A. Ferge
0.63
%
On                     ,
2005, the following executives of BLC received grants of the
following number of shares of restricted BLC common stock:
Mark J. Schulte
221.1
John P. Rijos
221.1
R. Stanley Young
189.5
Deborah C. Paskin
94.7
Effective as of the completion of the formation transactions
described in "Business — History," the
Restricted Securities Plans will be merged into the Omnibus
Stock Incentive Plan, which is described immediately below.
Omnibus Stock Incentive Plan
Prior to the occurrence of this offering, we intend to adopt a
new equity incentive plan for our employees, the Brookdale
Senior Living Omnibus Stock Incentive Plan, or the Plan, and to
present the Plan to our stockholders for their approval. The
purposes of the Plan will be to strengthen the commitment of our
employees, motivate them to faithfully and diligently perform
their responsibilities and attract and retain competent and
dedicated persons who are essential to the success of our
business and whose efforts will result in our long-term growth
and profitability. To accomplish such purposes, the Plan
provides for the issuance of stock options, stock appreciation
rights, restricted shares, deferred shares, performance shares,
unrestricted shares and other stock-based awards. We expect that
the following will generally describe the terms of the plan once
adopted.
A total
of            shares
of our common stock will be reserved for issuance under the
Plan, provided however, that commencing on the first day of our
fiscal year beginning in calendar year 2006, the number of
shares reserved and available for issuance will be increased by
an amount equal to the lesser of
(1)                      shares
or (2) 2% of the number of outstanding shares of our common
stock on the last day of the immediately preceding fiscal year.
When section 162(m) of the Internal Revenue Code, or the
Code, becomes applicable, the maximum aggregate number of shares
that will be subject to stock options or stock appreciation
rights that may be granted to any individual during any fiscal
year will
be                     and
the maximum aggregate number of shares that will be subject to
awards of restricted stock, deferred shares, unrestricted shares
or other stock-based awards that may be granted to any
individual during any fiscal year will
be           .
117
The Plan will initially be administered by our board of
directors, although it may be administered by either our board
of directors or any committee of our board of directors
including a committee that complies with the applicable
requirements of section 162(m) of the Code, Section 16 of the
Exchange Act and any other applicable legal or stock exchange
listing requirements (the board or committee being sometimes
referred to as the "plan administrator"). The plan
administrator may interpret the Plan and may prescribe, amend
and rescind rules and make all other determinations necessary or
desirable for the administration of the Plan. The Plan permits
the plan administrator to select the directors, key employees,
and consultants who will receive awards, to determine the terms
and conditions of those awards, including but not limited to the
exercise price, the number of shares subject to awards, the term
of the awards and the vesting schedule applicable to awards, and
to amend the terms and conditions of outstanding awards,
including but not limited to reducing the exercise price of such
awards, extending the exercise period of such awards and
accelerating the vesting schedule of such awards.
We may issue incentive stock options or non-qualified stock
options under the Plan. The incentive stock options granted
under the Plan are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Code
and may only be granted to our employees or any employee of our
parent or any subsidiary of the Company. The option exercise
price of all stock options granted under the Plan will be
determined by the plan administrator, except that any incentive
stock option or any stock option intended to qualify as
performance-based compensation under section 162(m) of the
Code will not be granted at a price that is less than 100% of
the fair market value of the stock on the date of grant.
Further, the exercise price of incentive stock options granted
to stockholders who own greater than 10% of the voting stock
will not be granted at a price less than 110% of the fair market
value of the stock on the date of grant. The term of all stock
options granted under the Plan will be determined by the plan
administrator, but may not exceed ten years (five years for
incentive stock options granted to stockholders who own greater
than 10% of the voting stock). No incentive stock option may be
granted to an optionee, which, when combined with all other
incentive stock options becoming exercisable in any calendar
year that are held by that optionee, would have an aggregate
fair market value in excess of $100,000. In the event an
optionee is awarded $100,000 in incentive stock options in any
calendar year, any incentive stock options in excess of $100,000
granted during the same year will be treated as nonqualified
stock options. Each stock option will be exercisable at such
time and pursuant to such terms and conditions as determined by
the plan administrator in the applicable stock option agreement.
Unless the applicable stock option agreement provides otherwise,
in the event of an optionee's termination of employment or
service for any reason other than cause, retirement, disability
or death, such optionee's stock options (to the extent
exercisable at the time of such termination) generally will
remain exercisable until 90 days after such termination and
will expire thereafter. Unless the applicable stock option
agreement provides otherwise, in the event of an optionee's
termination of employment or service due to retirement,
disability or death, such optionee's stock options (to the
extent exercisable at the time of such termination) generally
will remain exercisable until one year after such termination
and will expire thereafter. Stock options that were not
exercisable on the date of termination will expire at the close
of business on the date of such termination. In the event of an
optionee's termination of employment or service for cause,
such optionee's outstanding stock options will expire at
the commencement of business on the date of such termination.
In the event of a change in control (as defined below), unless
each outstanding stock option is assumed, continued or
substituted pursuant to the change in control transaction's
governing document, such stock options will become fully vested
and exercisable immediately prior to the effective date of such
change in control and will expire upon the effective date of
such change in control. If a change in control transaction
occurs that is a qualifying asset sale or that includes a
continuation, assumption or substitution of stock options, and
an optionee's employment with the Company or any acquiring
entity or affiliate thereof is terminated by the employer other
than for cause on or after the effective date of the change in
control but prior to the first anniversary of the
118
effective date of the change in control, then 50% of the
optionee's outstanding and unvested options will become
fully vested and exercisable as of the date of such termination.
The term change in control generally means (1) any person
or entity (other than (a) an affiliate of Fortress or any
managing director, general partner, director, limited partner of
any such affiliate of Fortress or (b) any investment fund
or other entity managed directly or indirectly by Fortress or
any general partner, limited partner, managing member or person
occupying a similar role of or with respect to any such fund or
entity) becomes the beneficial owner of securities of the
Company representing 50% of the Company's then outstanding
voting power; (2) the consummation of a merger of the
Company or any subsidiary of the Company with any other
corporation, other than a merger immediately following which the
board of directors of the Company immediately prior to the
merger constitute at least a majority of the board of directors
of the company surviving the merger or, if the surviving company
is a subsidiary, the ultimate parent thereof; or (3) the
Company's stockholders approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale of all or substantially
all of the Company's assets, other than (a) a sale of
such assets to an entity, at least 50% of the voting power of
which is held by Company stockholders following the transaction
in substantially the same proportions as their ownership of the
Company immediately prior to the transaction or (b) a sale
of such assets immediately following which the board of
directors of the Company immediately prior to such sale
constitute at least a majority of the board of directors of the
entity to which the assets are sold or, if that entity is a
subsidiary, the ultimate parent thereof.
In the event of a dissolution or liquidation of the Company, the
administrator may permit optionees to exercise stock options,
including stock options that would not otherwise be exercisable,
until ten days prior to such transaction. To the extent not
exercised, these stock options will terminate immediately prior
to the proposed transaction.
Stock appreciation rights, or SARs, may be granted under the
Plan either alone or in conjunction with all or part of any
stock option granted under the Plan. A stand alone SAR granted
under the Plan entitles its holder to receive, at the time of
exercise, an amount per share equal to the excess of the fair
market value (at the date of exercise) of a share of common
stock over a specified price fixed by the plan administrator. An
SAR granted in conjunction with all or part of a stock option
under the Plan entitles its holder to receive, at the time of
exercise, an amount per share equal to the excess of the fair
market value (at the date of exercise) of a share of common
stock over the exercise price of the related stock option. In
the event of a participant's termination of employment or
service, stand alone SARs will be exercisable at such times and
subject to such terms and conditions determined by the plan
administrator on or after the date of grant, while SARs granted
in conjunction with all or part of a stock option will be
exercisable at such times and subject to terms and conditions as
set forth for the related stock option.
Restricted shares, deferred shares and performance shares may be
granted under the Plan. The plan administrator will determine
the purchase price, performance period and performance goals, if
any, with respect to the grant of restricted shares, deferred
shares and performance shares. Participants with restricted
shares and shares of preferred stock generally have all of the
rights of a stockholder. With respect to deferred shares, during
the restricted period, subject to the terms and conditions
imposed by the plan administrator, the deferred shares may be
credited with dividend equivalent rights. If the performance
goals and other restrictions are not attained, the participant
will forfeit his or her shares of restricted shares, deferred
shares and/or performance shares. Subject to the provisions of
the Plan and applicable award agreement, the plan administrator
has sole discretion to provide for the lapse of restrictions in
installments or the acceleration or waiver of restrictions (in
whole or part) under certain circumstances, including, but not
limited to, the attainment of certain performance goals, a
participant's termination of employment or service, a
participant's death or disability or the occurrence of a
change in control as defined in the applicable award agreement.
119
Following the consummation of our offering, the Plan provides
that each of our non-employee directors (as defined in the Plan)
will automatically receive annual awards of our common stock
with an aggregate fair market value
of                     ,
valued as of the date of grant, on the first business day after
our annual meeting of stockholders, commencing in 2006, and each
annual meeting thereafter during which the Plan is in effect. In
addition, each member of our board that is an eligible director
immediately prior to the consummation of this offering will be
granted                      shares
of our common stock under our Plan on each of the first day
following: (1) the consummation of this offering,
(2) the meeting of stockholders in 2006 at which directors
are to be elected, and (3) the meeting of stockholders in
2007 at which directors are to be elected, so long as such
eligible director continues to serve as one of our directors on
each grant date. An eligible director that receives any of the
grants described in the preceding sentence during any fiscal
year will not be eligible to receive the automatic stock grants
under the Plan for that fiscal year.
In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend or other change in corporate
structure affecting the number of issued shares of common stock,
the plan administrator may make an equitable substitution or
proportionate adjustment in (1) the aggregate number of
shares reserved for issuance under the Plan, (2) the
maximum number of shares that may be granted to any participant
in any calendar year, and, (3) the kind, number and
exercise price subject to outstanding stock options and SARs
granted under the Plan, and (4) the kind, number and
purchase price of shares subject to outstanding awards of
restricted shares, deferred shares and performance shares
granted under the Plan, provided that no such adjustment will
cause any award under the Plan that is or becomes subject to
section 409A of the Code to fail to comply with the
requirements of that section. In addition, the plan
administrator, in its discretion, may terminate all awards with
the payment of cash or in-kind consideration.
The terms of the Plan provide that the board may amend, alter or
discontinue the Plan, but no such action may impair the rights
of any participant with respect to outstanding awards without
the participant's consent. Unless the board determines
otherwise, stockholder approval of any such action will be
obtained if required to comply with applicable law. The Plan
will terminate
on                     ,
2015.
Effective as of the date of the completion of the series of
formation transactions described in "Business —
History," the Restricted Stock Plans described above were
merged into the Plan.
401(k) Plans
Each of Alterra and BLC maintains retirement plans qualified
under Section 401 of the Internal Revenue Code, which plans
are substantially similar, and which cover all of their
respective employees. All employees, subject to certain
regulatory qualifications, who have completed the minimum one
year service requirement and who are at least 21 years of age,
with respect to the BLC 401(k) plan and 19 years of age, with
respect to the Alterra 401(k) plan are eligible to participate
in the 401(k) plans.
Pursuant to the 401(k) plans, employees may elect to defer up to
22% of their salary under the Alterra 401(k) plan and up to 90%
of their compensation under the BLC plan (not to exceed the
statutorily prescribed annual limits) and have the deferrals
contributed to the respective 401(k) plans.
Alterra and BLC have made discretionary contributions to the
401(k) plans in amounts determined annually by their boards of
directors. Under the 401(k) plans, an employee's benefits
from matching contributions are: (a) 20% vested after one
year of service, (b) 40% vested after two years of service,
(c) 60% vested after three years of service, (d) 80%
vested after four years of service and (e) 100% vested
after five years of service. The 401(k) plans may be amended or
terminated at any time; however, upon termination of the plan
all amounts credited to an employee's account become 100%
vested.
120
As soon as administratively feasible after the combination,
these two 401(k) plans will be merged.
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements
Prior Employment Agreement
Alterra entered into an employment agreement with Mark W.
Ohlendorf, dated May 16, 2003, or the Prior Employment
Agreement, which has been superseded by his current employment
agreement, which is described in "— Current
Employment Agreements" below. The Prior Employment
Agreement extended until December 31, 2005, following which
the agreement would automatically extend on an annual basis for
one additional year, unless notice not to renew was given
90 days prior to the expiration of its term.
Under the Prior Employment Agreement, Mr. Ohlendorf served
as President and Chief Financial Officer of Alterra, and
received an initial annual base salary of $350,000, with annual
increases commencing with the 2004 calendar year of at least
$10,000. The Prior Employment Agreement provided for an initial
incentive bonus of $220,000, with subsequent annual incentive
bonuses up to 50% of Mr. Ohlendorf's base salary, and
Mr. Ohlendorf would not be entitled to any other bonuses
other than the bonuses described above. The Prior Employment
Agreement also provided that Mr. Ohlendorf would be
eligible to participate in all employee benefit plans maintained
by Alterra for senior executives during the term of the
agreement, and Alterra would contribute for his benefit, $25,000
in the aggregate, to pension, profit sharing, retirement or
other deferred compensation plans or programs in which he
participates. Under the Prior Employment Agreement,
Mr. Ohlendorf was also entitled to a monthly automobile
allowance of $600.
The Prior Employment Agreement provided that Mr. Ohlendorf
would receive severance payments and benefits in the event of
termination of his employment by Alterra other than for
"cause" (as defined in the agreement) or by the
executive with "good reason" (as defined in the
agreement), or by reason of disability. These severance payments
include, for 12 months following the date of termination of
employment, continuation of annual base salary and continuation,
at Alterra's expense, of group health plan benefits, life
insurance, long-term disability benefits, and other employee
benefit plans or programs, to the extent permissible under the
terms of such plans or law. The severance payments and benefits
otherwise due if Mr. Ohlendorf's employment is
terminated by Alterra other than for cause or by him for good
reason, would not have been paid if Mr. Ohlendorf had
breached certain covenants in the Prior Employment Agreement,
including noncompetition and confidentiality restrictions and
the requirement to return company property.
Current Employment Agreements
Each of Alterra and BLC (each, an employer) have, along with the
Company, entered into employment agreements with several of
their respective employees
in                     2005,
or the Employment Agreements. Other than the positions and
salary and bonuses, these Employment Agreements are
substantially the same, except as noted below. Alterra and the
Company have entered into an employment agreement with Mark W.
Ohlendorf and Kristin A. Ferge. Mr. Ohlendorf's
agreement supersedes the Prior Employment Agreement. BLC and the
Company have entered into employment agreements with each of
Mark J. Schulte, John P. Rijos, R. Stanley Young and Deborah C.
Paskin. Upon the completion of the series of formation
transactions described in "Business —
History," the Company will be the employer of each of these
executives.
121
The executives' positions, annual base salaries and target
bonuses for the first fiscal year following the effective date
of the employment agreements are set forth below:
Annual Base
Target
Name/ Title
Salary
Bonus
Mark J. Schulte — Chief
    Executive Officer
$
200,000
$
200,000
Mark W. Ohlendorf —
    Co-President
$
200,000
$
300,000
John P. Rijos —
    Co-President
$
200,000
$
200,000
R. Stanley Young —
    Executive Vice President and Chief Financial Officer
$
175,000
$
150,000
Kristin A. Ferge —
    Executive Vice President and Treasurer
$
175,000
$
150,000
Deborah C. Paskin —
    Executive Vice President, Secretary and General Counsel
$
150,000
$
100,000
Under the Employment Agreements, the executives' bonuses
for the first fiscal year commencing after the effective date of
the Employment Agreements will be paid 50% in cash and 50% in
restricted shares of Company common stock pursuant to the
Company's Omnibus Stock Incentive Plan described in
"— Omnibus Stock Incentive Plan" above.
After the first fiscal year of the Company following the
effective date of the Employment Agreements, the
executives' respective bonuses will be based on achievement
of certain performance standards as determined by the board of
directors in its discretion, and may be payable in a combination
of cash and shares of common stock in the board of
directors' discretion.
The Employment Agreements have three year initial terms at the
end of which the agreements automatically extend on an annual
basis for up to two additional one year terms, unless notice not
to renew an agreement is given 90 days prior to the
expiration of its term. The Employment Agreements provide that
the executives will be entitled to all the usual benefits
offered to employees at the executives' levels including,
vacation, sick time, participation in the employer's 401(k)
retirement plan and medical, dental and insurance programs, all
in accordance with the terms of such plans and programs in
effect from time to time.
The Employment Agreements provide that, in the event of
termination of employment by the employer other than a
termination for "cause" (as defined in the agreement),
or by the executives with "good reason" (as defined in
the agreement), and the termination is not within 12 months
following a "change of control" (as defined in the
Employment Agreements), the executives will receive severance
payments and benefits, upon signing a release of claims in a
form adopted by the employer, or the Release, provided the
executives comply with any restrictive covenants by which the
executives are bound. These severance payments and benefits are
composed of continuation of annual base salary for six months
following the date of termination of employment and
continuation, at the employer's expense, of coverage under
the employer's medical plan until the earlier of six months
following the date of termination of employment or the period of
time until the executive becomes eligible under the medical
benefits program of a new employer.
In the event of a change of control, and the executives'
employment is terminated within 12 months following the
change in control either by the employer (or a successor)
without cause, or by the executives for good reason, then,
provided the executives sign the Release and comply with any
restrictive covenants by which the executives are bound, the
executives will be entitled to, for 12 months following the
date of termination of employment, continuation of annual base
salary (at the rate in effect at the time of termination, or if
higher, immediately prior to the change of control) and
continuation of coverage under the employer's medical plan.
122
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Agreements With Stockholders
General
In connection with the series of formation transactions
described in "Business — History," we
entered into various agreements with respect to our governance
and our common stock. The following is a summary of material
provisions of these agreements. This summary does not purport to
be complete and is qualified in its entirety by reference to the
respective agreements, a copy of each of which is filed as
exhibits hereto.
Stockholders Agreement
In                      2005,
we entered into a Stockholders Agreement with FBA, Fortress
Investment Trust II and Health Partners (the
"Stockholders Agreement"). The Stockholders Agreement
provides these stockholders with certain rights with respect to
the designation of directors to our board of directors as well
as registration rights for our securities owned by them.
Designation of Directors
The Stockholders Agreement requires that each of FBA, Fortress
Investment Trust II and their respective affiliates and
permitted transferees (collectively referred to in this
prospectus as the "Fortress Stockholders") and Health
Partners and its affiliates and permitted transferees
(collectively referred to in this prospectus as the "HP
Stockholders") vote or cause to be voted all of our voting
stock beneficially owned by each and to take all other
reasonably necessary action so as to elect to our board of
directors the following:
•
so long as the Fortress Stockholders beneficially own
    (i) more than 50% of the voting power of the Company, four
    directors designated by FIG Advisors LLC, an affiliate of
    Fortress, or such other party designated by Fortress
    ("FIG"); (ii) between 25% and 50% of the voting
    power of the Company, three directors designated by FIG;
    (iii) between 10% and 25% of the voting power of the
    Company, two directors designated by FIG; and (iv) between
    5% and 10% of the voting power of the Company, one director
    designated by FIG; and
•
so long as the HP Stockholders beneficially own more than 5% of
    the voting power of the Company, one director designated by
    Health Partners.
If at any time the number of our directors entitled to be
designated by FIG or HP pursuant to the Stockholder Agreement
shall decrease, within 10 days thereafter, FIG or HP, as
applicable, shall cause the appropriate number of directors to
resign and any such vacancy shall be filled by a majority vote
of our board of directors.
In accordance with the Stockholders Agreement, FIG has
designated Wesley R. Edens and William Doniger and Health
Partners has
designated                     to
our board of directors.
Registration Rights
Demand Rights.
We have granted to the Fortress
Stockholders and the HP Stockholders, in each case for so long
as such stockholders collectively and beneficially own an amount
of our common stock at least equal to 5% or more of our common
stock issued and outstanding immediately after the consummation
of this offering, a "Registrable Amount,"
"demand" registration rights that allow them at any
time
after                     ,
to request that we register under the Securities Act of 1933, as
amended, an amount equal to or greater than 5% of our stock that
they own. Each of the Fortress Stockholders and the HP
Stockholders is entitled to an aggregate of two demand
registrations. We are not required to maintain the effectiveness
of the registration statement for more than 60 days. We are
also not required to effect any demand registration within six
months of a "firm
123
commitment" underwritten offering to which the requestor
held "piggyback" rights and which included at least
50% of the securities requested by the requestor to be included.
We are not obligated to grant a request for a demand
registration within six months of any other demand registration,
and may refuse a request for demand registration if in our
reasonable judgment, it is not feasible for us to proceed with
the registration because of the unavailability of audited
financial statements.
Piggyback Rights.
For so long as they beneficially
own an amount of our common stock at least equal to 1% of our
common stock issued and outstanding immediately after the
consummation of this offering, the Fortress Stockholders and the
HP Stockholders also have "piggyback" registration
rights that allow them to include the shares of common stock
that they own in any public offering of equity securities
initiated by us (other than those public offerings pursuant to
registration statements on Forms S-4 or S-8) or by any of
our other stockholders that have registration rights. The
"piggyback" registration rights of these stockholders
are subject to proportional cutbacks based on the manner of the
offering and the identity of the party initiating such offering.
Shelf Registration.
We have granted each of the
Fortress Stockholders and the HP Stockholders, for so long as
each beneficially owns a Registrable Amount, the right to
request a shelf registration on Form S-3, providing for an
offering to be made on a continuous basis, subject to a time
limit on our efforts to keep the shelf registration statement
continuously effective and our right to suspend the use of the
shelf registration prospectus for a reasonable period of time
(not exceeding 60 days in succession or 90 days in the
aggregate in any 12 month period) if we determine that
certain disclosures required by the shelf registration statement
would be detrimental to us or our stockholders. In addition,
each of the Fortress Stockholders and HP Stockholders which have
not made a request for a shelf registration may elect to
participate in such shelf registration within ten days after
notice of the registration is given.
Indemnification; Expenses.
We have agreed to
indemnify each of the Fortress Stockholders and the HP
Stockholder against any losses or damages resulting from any
untrue statement or omission of material fact in any
registration statement or prospectus pursuant to which they sell
shares of our common stock, unless such liability arose from
such stockholder's misstatement or omission, and each such
stockholder has agreed to indemnify us against all losses caused
by its misstatements or omissions. We will pay all expenses
incident to our performance under the Stockholders Agreement,
and the Fortress Stockholders and HP Stockholders will pay their
respective portions of all underwriting discounts, commissions
and transfer taxes relating to the sale of their shares under
the Stockholders Agreement.
Registration Rights Agreement With Emeritus and NW
Select
In the event Emeritus and NW Select are unable to sell all of
our shares of common stock offered by them in this offering, we
have agreed to enter into a registration rights agreement (the
"Registration Rights Agreement") with Emeritus and NW
Select immediately after the consummation of this offering.
Demand Rights.
Pursuant to the Registration Rights
Agreement, Emeritus, NW Select and their respective affiliates
and permitted transferees (collectively, the "ENW
Stockholders"), for so long as they beneficially own a
Registrable Amount, will have one "demand"
registration right that allows the ENW Stockholders, at any
time, to request that we register under the Securities Act an
amount equal to or greater than 5% of our stock owned by the ENW
Stockholders. The ENW Stockholders are collectively entitled to
one demand registration. We are not required to maintain the
effectiveness of the registration statement for more than
60 days. We are also not required to effect any demand
registration within six months of a "firm commitment"
underwritten offering to which the requestor held
"piggyback" rights and which included at least 50% of
the securities requested by the requestor to be included. We are
not obligated to grant a request for a demand registration
within six months of any other demand registration, and may
refuse a request for demand registration if in our
124
reasonable judgment, it is not feasible for us to proceed with
the registration because of the unavailability of audited
financial statements.
Piggyback Rights.
For so long as they beneficially
own a Registrable Amount, the ENW Stockholders also have
"piggyback" registration rights that allow them to
include the shares of common stock that they own in any public
offering of equity securities initiated by us (other than those
public offerings pursuant to registration statements on
Forms S-4 or S-8) or by any of our other stockholders that
have registration rights. The "piggyback" registration
rights of these stockholders are subject to proportional
cutbacks based on the manner of the offering and the identity of
the party initiating such offering. In the event that the ENW
Stockholders are unable to sell all of our shares of common
stock offered by them in this offering due to underwriter
cutbacks, then the ENW Stockholders shall be entitled to one
additional piggyback registration right even if they cease to
own a Registrable Amount after the consummation of this offering.
Indemnification; Expenses.
We have agreed to
indemnify each of the ENW Stockholders against any losses or
damages resulting from any untrue statement or omission of
material fact in any registration statement or prospectus
pursuant to which they sell shares of our common stock, unless
such liability arose from such stockholder's misstatement
or omission, and each such stockholder has agreed to indemnify
us against all losses caused by its misstatements or omissions.
We will pay all expenses incident to our performance under the
Registration Rights Agreement, and the ENW Stockholders will pay
their respective portions of all underwriting discounts,
commissions and transfer taxes relating to the sale of their
shares under the Registration Rights Agreement.
Governance Agreement
In                     ,
2005, Fortress Brookdale Investment Fund LLC, Fortress
Investment Trust II, Fortress Registered Investment Trust
and Health Partners entered into a governance agreement (the
"Governance Agreement"). Each of Fortress Brookdale
Investment Fund LLC, Fortress Investment Trust II and
Fortress Registered Investment Trust is an affiliate of
Fortress, our largest stockholder. Pursuant to the Governance
Agreement, each of Fortress Brookdale Investment Fund LLC,
Fortress Investment Trust II, Fortress Registered
Investment Trust and their respective affiliates and permitted
transferees (collectively, the "Fortress
Fund Stockholders") and the HP Stockholders shall vote
or cause to be voted all of our voting stock beneficially owned
by each and take all other reasonably necessary action so as to
elect to our board of directors one director designated by the
HP Stockholders. The Governance Agreement shall terminate
automatically upon the consummation of this offering and be of
no further force or effect.
In addition, during the term of the Governance Agreement,
certain actions taken by us, including with respect to any
increase in our capital stock and the acquisition or disposition
of any asset, require the approval of the director designated by
the HP Stockholders.
Stockholders Agreement with Emeritus and NW Select
On June 29, 2005, we entered into a Stockholders and Voting
Agreement with FIT-ALT Investor, Emeritus and NW Select (the
"ENW Stockholders Agreement"). Among other things, the
ENW Stockholders Agreement requires the ENW Stockholders to vote
all of our shares of common stock beneficially owned by them as
directed by FIT-ALT Investor LLC or its transferees. In
addition, the ENW Stockholders may not transfer the shares of
our common stock that they beneficially own other than to their
permitted transferees.
The ENW Stockholders Agreement shall terminate automatically
upon the consummation of this offering and be of no further
force or effect.
125
Conveyance Agreement
In                     2005,
we entered into a conveyance agreement with certain equity
holders of BLC, FEBC-ALT Investors (Alterra's indirect
parent company) and Fortress CCRC, including several affiliates
of Fortress. Pursuant to this conveyance agreement, three
separate wholly-owned subsidiaries of ours were merged with and
into BLC, FEBC-ALT Investors and Fortress CCRC, respectively,
and the equity holders of these entities received an aggregate
of 58,000,000 shares of our common stock and became direct
owners of 100% of our common stock prior to this offering.
Pursuant to the conveyance agreement, we have agreed to
indemnify each of such former equity holders of BLC, FEBC-ALT
Investors and Fortress CCRC from any damages suffered by such
equity holders as a result of breaches of representations and
warranties made by us in the conveyance agreement. See
"Business — History" for a further
description of these transactions and "Principal and
Selling Stockholders" for a list of the equity holders.
Acquisition of Membership Interests of FEBC-ALT Investors by
FIT-ALT Investor LLC
In June 2005, we entered into a Membership Interest Purchase
Agreement with FIT-ALT Investor LLC, Emeritus and NW Select.
Pursuant to this agreement, FIT-ALT Investor purchased from
Emeritus and NW Select membership interests in FEBC-ALT
Investors representing approximately 25% of the membership
interests in FEBC-ALT Investors for an aggregate purchase price
of $50.0 million. In connection with this transaction,
FEBC-ALT Investors paid a preferred distribution of
$20.0 million to FIT-ALT Investor LLC in connection with
its membership interest in FEBC-ALT Investors. FIT-ALT Investor
used the proceeds of the distribution to pay a portion of the
purchase price. In addition, pursuant to this agreement, each of
Emeritus and NW Select agreed to sell in this offering all of
the shares of our common stock received by them
in                     2005
in exchange for their membership interests in FEBC-ALT
Investors. Also, we agreed to indemnify each of Emeritus and NW
Select against various liabilities in connection with this
offering.
In August 2005, FIT-ALT Investor, Emeritus and NW Select entered
into an amendment of the limited liability company agreement of
FEBC-ALT Investors. Pursuant to this amendment, FIT-ALT Investor
exchanged a preferred distribution of approximately $7.1 million
from FEBC-ALT Investors to which FIT-ALT Investor was entitled
to under FEBC-ALT Investors' limited liability company
agreement.
Provident
Darryl W. Copeland, Jr., previously the chief executive
officer, president and chairman of the board of trustees of
Provident, was, until April 2004, a member of the boards of
directors of both BLC and Alterra. Mr. Copeland also was a
managing director of Fortress Capital Finance, an affiliate of
Fortress, from August 2001 until April 2004. Provident is party
to the sale-leaseback arrangements described in
"Business — Leases — Provident
Sale-Leasebacks."
Chambrel
In December 2001, BLC entered into an agreement to purchase
seven facilities from AIMCO consisting of 1,477 units, or
the Chambrel Portfolio, for which it made earnest money deposits
in the aggregate amount of $4.0 million. The deposits were
funded with the proceeds of advances made to BLC by Capstead
Mortgage Corporation, or Capstead, a publicly traded company in
which an affiliate of Fortress held an interest at the time.
Fortress no longer has any interest in Capstead. In connection
with the closing, BLC assigned its rights under the purchase and
sale agreements to subsidiaries of Capstead and entered into
seven operating leases with subsidiaries of Capstead. On
October 31, 2002, Capstead sold the Chambrel at Windsong
Care Center in Akron, Ohio, an 83-bed skilled nursing center,
and terminated the related operating lease. The net cost of the
remaining six facilities, consisting of 1,394 units, was
approximately $148.7 million (including the assumption of
approximately $120.6 million of debt).
126
Battery Park City
As of September 2001, BLC's The Hallmark at Battery Park
City facility was encumbered by a $49.1 million first
mortgage loan and certain hedging contracts, all of which were
guaranteed by BLC. Subsequent to the terrorist attacks of
September 11, 2001, the lenders declared the loan and
hedging contracts to be in default and, on March 19, 2002,
notified BLC of an acceleration of the first mortgage loan and
demand for performance pursuant to the guaranty. In September
2002, FRIT BPC Acquisition LLC, or FRIT BPC, an affiliate of
Fortress, purchased the loan with a balance of
$50.2 million, including principal, accrued interest,
default interest and late charges. On October 28, 2002, the
loan was modified to provide for: (i) the payment of
interest at LIBOR plus 2.70%, payable to the extent of cash flow
through September 30, 2003 and monthly thereafter;
(ii) quarterly payments of principal to the extent of cash
flow (as defined); and (iii) a scheduled maturity date of
December 31, 2004, with an option for BLC to extend the
maturity date to December 31, 2005.
The facility was also encumbered by a mezzanine loan in the
maximum principal amount of $8.5 million, with a balance of
$9.8 million including accrued interest, which was
purchased by FRIT BPC in December 2002. On January 30,
2003, the mezzanine loan was amended to extend the scheduled
maturity date of December 31, 2004, with an option for BLC,
to extend the maturity date to December 31, 2005. In
connection with the purchase, BLC granted the seller of the
mezzanine loan a 25% equity interest in the facility pursuant to
an equity participation agreement.
In November 2004, BLC paid the seller of the mezzanine loan
$100,000 to terminate the equity participation agreement. FRIT
BPC reimbursed BLC for this payment. On March 30, 2005, BLC
completed a refinancing of five facilities, including The
Hallmark, Battery Park City, and repaid the FRIT BPC first
mortgage and mezzanine loans. See "Description of
Indebtedness — Guaranty Bank Mortgage Loan." We
intend to use a portion of the net proceeds of this offering to
repay a portion of the Guaranty Bank Mortgage Loan. See
"Use of Proceeds."
Grand Court
In January 2001, BLC acquired a 45% interest in GFB-AS
Investors, LLC, or GFB, for approximately $5.7 million.
GFB, in turn, acquired the equity interests in the general
partners of various limited partnerships, or GC LPs, each of
which owned one senior living facility, and each of which were
previously owned or controlled by affiliates of Grand Court
Lifestyles, Inc., together with management contract rights and
certain loans receivable. A wholly-owned subsidiary of BLC
entered into management consulting agreements with each of the
GC LPs. The total initial investment in GFB was approximately
$12.8 million, of which BLC's share was approximately
$5.7 million and was funded from the proceeds of a loan
made by an affiliate of Fortress. In September 2002, the members
of GFB contributed approximately $2.6 million to fund
additional purchases of limited partnership interests in certain
GC LPs and to provide loans to various partnerships, of which
BLC's share was approximately $1.2 million. BLC's
share was funded by a loan from an affiliate of Fortress. In May
2003, BLC purchased the remaining 55% interest in GFB for net
cash consideration of approximately $10.5 million,
including closing costs, which was funded by a loan from the
stockholders of FBA. During the first quarter of 2004, 14 of the
limited partnerships sold the facilities that they owned to
Ventas and, in connection with such sales, certain subsidiaries
of BLC entered into and became the tenants under a master lease
with Ventas. For a more detailed description of the Ventas
transaction, see
"Business — Leases — Ventas
Lease Arrangement with BLC."
SNH
On February 28, 2003, AHC Trailside, Inc., a subsidiary of
Alterra, entered into and became the tenant under a lease, or
the SNH Lease, with SNH ALT Leased Properties Trust, or SNH, for
25 assisted living properties. Simultaneously with the entering
into of the SNH Lease, SNH ALT Mortgaged Property Trust, an
affiliate of SNH, made a $6.9 million loan, or the SNH
Loan, to Pomacy Corporation, a wholly owned subsidiary of
Alterra. At such time, the SNH Lease and SNH
127
Loan were subject to cross-defaults, cross-guarantee and
cross-collateralization. In December 2003, in connection with
Alterra's reorganization, FIT-ALT SNH Loan LLC, a
subsidiary of Fortress, purchased the SNH Loan from SNH ALT
Mortgaged Property Trust for an amount equal to the outstanding
principal balance of the SNH Loan plus accrued interest, the SNH
Lease and SNH Loan were amended to eliminate the cross-defaults,
cross-guarantees and cross-collateralization between the SNH
Loan documents and the SNH Lease documents, and Alterra paid SNH
$1.0 million as consideration for the agreement to sell the
SNH Loan. Pomacy repaid the SNH Loan in full during 2004 with
the proceeds of sale of all but one of the properties mortgaged
to secure such loan and obtained a release of the mortgage on
the remaining property for a final payment of $1.5 million.
The NBA
The NBA is a 501(c)(3) not-for-profit organization founded in
1887. As a result of deteriorating operating performance and
unsuccessful negotiations to restructure the NBA's debt and
management, bonds issued by the NBA were trading at a discount
to their par value. In January and February 2004, FIT CCRC LLC,
an affiliate of Fortress, acquired $44.7 million aggregate
amount of the NBA bonds. Fortress helped form the unsecured
creditors' committee to lead a restructuring of the NBA. In
February 2004, the NBA elected to file for bankruptcy
protection. In September 2004, Fortress CCRC negotiated an asset
purchase agreement to acquire the Fortress CCRC Portfolio from
the NBA, and was subsequently selected as the winning bidder
through a bankruptcy auction in December 2004. The acquisition
closed in April and May 2005. Proceeds from the sale of these
facilities and cash from the NBA were used to fund a plan of
reorganization, which included repayment in full of the bonds
owned by FIT CCRC LLC.
Loan to Mark J. Schulte
In October 2000, BLC loaned approximately $2.0 million to
our chief executive officer, Mark J. Schulte. In exchange, BLC
received a ten-year, secured, non-recourse promissory note from
Mr. Schulte, which bears interest at a rate of
6.09% per annum, 2.0% of which is payable in cash the
remainder of which accrues and will be paid at maturity on
October 2, 2010. The greatest outstanding amount of
indebtedness due on the note within our last fiscal year was
approximately $2.4 million, and the amount outstanding as
of March 31, 2005 was approximately $2.4 million. The
note is secured by Mr. Schulte's membership interests
in FBA, an affiliate of Fortress and the former holder of a
majority of the outstanding common stock of BLC.
Formation Transactions
In                     2005,
we entered into a series of merger transactions with our large
stockholders. See "Business — History" for a
detailed explanation of these transactions.
128
PRINCIPAL AND SELLING STOCKHOLDERS
Prior to this offering, substantially all of the ownership
interests in the Company were beneficially owned by affiliates
of Fortress, Health Partners, Emeritus, NW Select and certain
members of our management.
The following table sets forth the total number of shares of our
common stock beneficially owned, and the percent so owned, as
adjusted to reflect the sale of the shares offered hereby, by
(i) each person known by us to be the beneficial owner of
more 5% of our common stock, (ii) each of our directors and
named executive officers (iii) all directors and executive
officers as a group, and (iv) the selling stockholders.
Beneficial ownership is determined in accordance with SEC rules
and generally includes voting or investment power with respect
to securities. Shares of common stock subject to options or
warrants currently exercisable, or exercisable within
60 days of the date hereof, are deemed outstanding for
computing the percentage of the person holding such options or
warrants but are not deemed outstanding for computing the
percentage of any other person.
The percentage of beneficial ownership of our common stock
before this offering is based on 58,000,000 issued shares of our
common stock outstanding as
of                ,
2005. The percentage of beneficial ownership of our common stock
after this offering is based
on                      shares
of our common stock outstanding. The table assumes that the
underwriters will not exercise their over allotment option to
purchase up
to                      shares
of our common stock. If the underwriters exercise their option,
some of the selling stockholders, as indicated in the table,
will sell the additional shares necessary to satisfy the option
exercise ratably in proportion to the number of shares offered
by the selling stockholders before the option exercise.
Shares
Beneficially
Shares
Owned Before
Beneficially
Offering
Owned After
Offering
Number
Shares
of
Being
Number
Name of Beneficial Owner
Shares(2)
Percent(3)
Offered
of Shares
Percent
Executive Officers and
    Directors(1)
Wesley R. Edens(4)
43,157,000
74.4
%
—
43,157,000
%
Mark J. Schulte
690,829
*
—
691,518
*
Mark W. Ohlendorf
300,000
*
—
300,000
*
John P. Rijos
442,106
*
—
442,106
*
R. Stanley Young
378,939
*
—
378,939
*
Deborah C. Paskin
189,479
*
—
189,479
*
Kristin A. Ferge
112,500
*
—
112,500
*
Randal A. Nardone(4)
43,157,000
74.4
%
—
43,157,000
%
William B. Doniger
—
—
—
—
All directors and executive
    officers as a group (9 persons)
45,270,853
78.0
%
—
45,299,062
%
5% Stockholders
Fortress Investment Holdings
    LLC(4)(5)
43,157,000
74.5
%
—
43,157,000
%
Health Partners(5)(6)
7,844,625
13.5
%
—
7,866,368
%
Selling Stockholders
Emeritus Corporation(7)
2,086,000
3.6
%
2,086,000
—
—
NW Select LLC(7)
2,086,000
3.6
%
2,086,000
—
—
129
*     Less than 1%
(1)
The address of each officer or director listed in the table
    below, except Mark W. Ohlendorf and Kristin A. Ferge, is:
    c/o Brookdale Senior Living Inc., 330 North Wabash,
    Suite 1400, Chicago, Illinois 60611. The address of Mark W.
    Ohlendorf and Kristin A. Ferge is c/o Brookdale Senior
    Living Inc., 6737 W. Washington St., Suite 2300,
    Milwaukee, Wisconsin 53214.
(2)
Consists of shares held, including restricted shares, shares
    underlying stock options exercisable within 60 days and
    shares underlying warrants exercisable within 60 days.
(3)
Assumes the exercise by such persons of all options and warrants
    exercisable within 60 days to acquire shares of common
    stock and no exercise of options or warrants by any other person.
(4)
Includes 13,228,000 shares held by FIT-ALT Investor LLC,
    20,000,000 shares held by Fortress Investment Trust II
    and 9,929,000 shares held by Fortress Brookdale Acquisition
    LLC. FIT-ALT Investor LLC is a wholly-owned subsidiary of
    Fortress Investment Trust II, which is a wholly-owned
    subsidiary of Fortress Investment Fund II LLC. Fortress
    Investment Fund II LLC is managed by its managing member,
    Fortress Fund MM II LLC, which is managed by Fortress
    Investment Group LLC pursuant to a management agreement.
    Fortress Brookdale Acquisition LLC is majority owned by Fortress
    Registered Investment Trust, which is 100% owned by Fortress
    Investment Fund LLC. Fortress Investment Fund LLC is managed by
    its managing member, Fortress Fund MM LLC, which is managed
    by Fortress Investment Group LLC pursuant to a management
    agreement. Fortress Investment Group LLC is 100% owned by
    Fortress Investment Holdings LLC. Fortress Investment Holdings
    LLC is an entity that is owned by certain individuals, including
    Wesley R. Edens, our Chairman of the board, and Randal A.
    Nardone, a member of our board. By virtue of their ownership
    interests in Fortress Investment Holdings LLC, Mr. Edens and Mr.
    Nardone may be deemed to beneficially own the shares listed as
    beneficially owned by Fortress Investment Holdings LLC.
    Mr. Edens and Mr. Nardone disclaim beneficial
    ownership of such shares.
(5)
The address of Fortress Investment Holdings LLC is 1251 Avenue
    of the Americas, 16th Floor, New York, New York 10020. The
    address of Health Partners is c/o Capital Z Management,
    LLC, 54 Thompson Street, New York, New York 10012.
(6)
Mr.                     ,
    who is one of our directors, is a shareholder of Capital Z
    Partners, Ltd., the ultimate general partner of Capital Z
    Financial Services Fund II, L.P.
    Mr.                     owns           %
    of the voting capital stock of Capital Z Partners, Ltd.
    Mr.                                     disclaims
    beneficial ownership of all shares of our common stock that are
    beneficially owned by Capital Z.
(7)
The address of Emeritus Corporation is 3131 Elliot Avenue,
    Suite 500, Seattle, Washington 98121. The address of NW
    Select LLC is 600 University Street, Suite 2500, Seattle,
    Washington 98101.
130
DESCRIPTION OF INDEBTEDNESS
The GECC Mortgage Loan
General.
Subsidiaries of Fortress CCRC are
borrowers under a mortgage loan made on April 5, 2005 by
General Electric Capital Corporation, or GECC, and Merrill Lynch
Capital, which we refer to as the GECC mortgage loan, with a
current balance of $105.8 million. If certain financial
covenants in the GECC mortgage loan are satisfied, the borrowers
have the option to borrow up to an additional $30.0 million
as a one-time advance.
Security for the Mortgage Loan.
The GECC mortgage
loan is secured by (i) mortgage liens on the
borrowers' fee interests in seven facilities, including the
one currently under contract for sale, comprising the Fortress
CCRC Portfolio, (ii) a security interest in substantially
all of the borrowers' personal property and fixtures,
(iii) a pledge of the membership interests (or equivalent
equity interests) of each of the borrowers, (iv) a guaranty
for typical non-recourse carveouts by us, and (v) a
$10.0 million limited guaranty by us for certain capital
improvements to be completed at the facilities.
Interest Rate.
The GECC mortgage loan has an
interest rate equal to the 30-day LIBOR plus a margin of
3.0% per annum (which margin is reduced to 2.75% per
annum if certain financial covenants are satisfied).
Interest Rate Swap.
In connection with the GECC
mortgage loan we entered into an interest rate swap with Merrill
Lynch Capital Services to hedge our interest rate risk and
convert the loan from a floating rate to a fixed rate through
January 22, 2008. The notional amount of the interest rate
swap is $108.0 million of which $2.2 will be redesignated
and we pay a fixed rate of 3.615% and receive one-month LIBOR.
Prior to closing the financing we entered into an additional
$12.0 million amortizing interest rate swap where we pay a
fixed rate of 3.615% and receive one-month LIBOR. We intend to
redesignate this swap to the estimated debt financing to be
obtained in connection with the six facilities currently leased
but expected to be purchased.
Payment Terms.
For the first four years of the
GECC mortgage loan, we are required to make monthly payments in
arrears of interest only. Commencing on April 1, 2009, we
will also be required to make a monthly principal amortization
payment based upon the outstanding principal balance of the GECC
mortgage loan, using a 25-year period and an assumed annual
interest rate equal to 6.0%.
Debt Service Coverage Ratio.
Commencing on
September 30, 2005, the debt service coverage ratio
(defined in the GECC mortgage loan as the ratio of
(i) adjusted net operating income from the properties for
the 12-month period ending on the applicable measurement date to
(ii) annualized payments of debt service due on the GECC
mortgage loan for the same period) shall not, as of the end of
any calendar quarter through June 30, 2006, fall to lower
than 1.15:1.0 or, after September 30, 2006, fall to lower
than 1.3:1.0.
Project Yield.
Commencing on September 30,
2005 and as of the last day of each calendar quarter through
December 31, 2005, the project yield (defined in the GECC
mortgage loan as a percentage of (i) adjusted net operating
income from the properties for the 12 month period ending
on the applicable measurement date to (ii) the outstanding
principal balance of the GECC mortgage loan on the applicable
measurement date) shall equal or exceed 8.5%. Commencing on
September 30, 2006 and as of the last day of each calendar
quarter through June 30, 2007, the project yield shall
equal or exceed 11%. Commencing on September 30, 2007 and
commencing on the last day of each calendar quarter thereafter,
the project yield shall equal or exceed 13%.
Occupancy Requirements.
Commencing on
September 30, 2005 and as of the last day of each calendar
quarter thereafter, the average daily occupancy for the
properties for any such
131
calendar quarter must be greater than 90% of the average daily
occupancy at the facilities at closing.
Failure to Meet Debt Service Ratio, Project Yield or
Occupancy Requirement.
If we fail to meet either the
debt service coverage ratio or the project yield thresholds,
then, within ten days thereafter, we must either deposit with
the lender a letter of credit or pay down a portion of the
principal balance of the GECC mortgage loan, in each case in an
amount necessary to meet such project yield requirement or debt
service coverage ratio requirement, as applicable. Failure to
deposit such letter of credit or pay down the principal balance
of the GECC mortgage loan if either financial covenant is not
met constitutes as an event of default. Failure to maintain the
occupancy rate also constitutes an event of default.
Voluntary Prepayment.
The borrowers may prepay the
GECC mortgage loan without penalty in whole or in part on or
after April 1, 2007.
Special Purpose Entities.
In connection with the
GECC mortgage loan, the organizational documents of the
borrowers were amended to limit their purposes and to add other
provisions consistent with the provisions of the organizational
documents of special purpose entities.
Certain Covenants.
The GECC mortgage loan
documents include representations, warranties and covenants
customary for mortgage loans. Among other things, the borrowers
are prohibited from incurring additional indebtedness or further
encumbering their assets. In addition, so long as the GECC
mortgage loan remains outstanding, (i) Fortress Investment
Trust II or its affiliates shall own, in the aggregate,
directly or indirectly, not less than 35% of the ownership
interests in us, or (ii) (A) Wesley R. Edens shall
remain a manager of Fortress Investment Group, LLC and be our
chairman of the board of directors, (B) Fortress Investment
Trust II or its affiliates shall own, in the aggregate,
directly or indirectly, not less than ownership interests in us
that they owned at the time of this offering, or (C) we
must have a market capitalization equal to or greater than
$500.0 million.
Merrill Lynch Mortgage Loan
General.
AHC Purchaser, Inc., a subsidiary of
Alterra, is the borrower under a mortgage loan made on
December 31, 2004 by Merrill Lynch Capital, which we refer
to as the Merrill Lynch mortgage loan, with a current principal
balance of $62.5 million and AHC Purchaser Holding II,
Inc., another subsidiary of Alterra, is the borrower under a
mezzanine loan made on December 31, 2004 by Merrill Lynch
Capital, which we refer to as the junior loan, with a current
principal balance of $10.0 million. The Merrill Lynch
mortgage loan and the junior loan both mature on
December 31, 2007, with an option to extend the maturity
date for up to two 12-month terms, provided that both loans are
extended concurrently.
Security for the Mortgage Loan.
The Merrill Lynch
mortgage loan is secured by (i) mortgage liens on the
borrower's fee interests in 21 properties,
(ii) security liens on the borrower's personal assets,
(iii) an unconditional guaranty from AHC Purchaser Holding,
Inc. and Alterra for all amounts due under the Merrill Lynch
mortgage loan, and (iv) a pledge of 100% of the capital
stock in the borrower. The junior loan is secured by (a) a
collateral assignment of 100% of the capital stock of the
borrower and (b) a guaranty from Alterra for all amounts
due under the junior loan.
Interest Rate.
The Merrill Lynch mortgage loan has
an interest rate equal to the 30 day LIBOR plus a margin of
3.642% per annum and the junior loan has an interest rate
equal to the 30 day LIBOR plus a margin of 9.5% per
annum. If the combined interest rate (as defined under the
applicable loan documents) falls below 6.0%, then the Merrill
Lynch mortgage loan shall bear additional interest at a rate
such that the combined rate equals 6.0%.
Interest Rate Swap.
In connection with the Merrill
Lynch mortgage loan we entered into an interest rate swap with
Merrill Lynch Capital Services, Inc. to hedge our interest rate
risk and convert the loan from a floating rate to a fixed rate
through March 22, 2012. The notional amount of the interest
rate swap is $70.0 million and we pay a fixed rate of 4.70%
and receive one-month LIBOR.
132
Voluntary Prepayments.
The borrowers may prepay
the loans in whole but not in part on or after July 1,
2006, provided they pay an exit fee to the lender with respect
to the Merrill Lynch mortgage loan in an amount equal to
$1.875 million through the end of calendar year 2006, and
thereafter $937,500, and with respect to the junior loan in an
amount equal to $300,000 through the end of calendar year 2006,
and thereafter $150,000.
Debt Service Coverage Ratio.
The debt service
coverage ratio (defined as the ratio of (i) net operating
income of the properties securing the loans to (ii) total
debt service) shall not as of the end of each calendar month
fall below 1.30:1.0.
Payment Terms.
The borrowers are required to make
monthly payments in arrears of interest on the outstanding
principal balance of the loans, and any additional interest, and
monthly principal amortization payments as set forth in a
schedule attached to the loan agreement. Commencing on
January 1, 2008, if the project yield (defined as the
quotient of (i) net operating income from the properties
divided by (ii) the sum of the then current outstanding
principal balance plus accrued and unpaid interest (on both the
mortgage and junior loans)) for any calendar month is less than
14%, then in addition to any other required payments, the
borrowers will be required to make monthly payments to the
lender in an amount equal to approximately 64.66% of excess cash
flow of the properties (defined as net cash flow for such period
less current scheduled principal and interest payments due on
the loans).
Project Yield.
The project yield shall not, as of
the end of each calendar month, fall below 10.25% during the
first year of the loans, 11.0% during the second year of the
loans, 12.0% during the third year of the loans, and 13.0% for
all years thereafter.
Certain Covenants.
The loan documents include
representations, warranties, and covenants customary for
mortgage loans. Among other things, the borrowers are prohibited
from incurring additional indebtedness or further encumbering
their assets. Alterra may not incur any indebtedness to any of
its stockholders or affiliates, and at any time an event of
default is continuing under the loan documents, may not pay any
dividends. The loan documents also require Alterra to maintain
unrestricted cash and/or availability under lines of credit or
revolving loan agreements in the aggregate amount of at least
$8.0 million and, in certain circumstances, at least
$10.0 million. Provided that Merrill Lynch reasonably
determines that Alterra's fixed charge coverage ratio is
not equal to or greater than 1:1 on a prospective basis taking
into account any of the following events, Alterra may not
(i) declare a dividend or make other distributions of any
kind to Alterra's stockholders, (ii) make any asset
acquisition of $10.0 million or more, (iii) enter into
any sale-leaseback transaction where the sale price is
$10.0 million or more, (iv) incur any debt for
borrowed money, or (v) incur any lease obligations (other
than (a) renewals or extensions of existing leases pursuant
to options to do so in such leases, (b) intercompany leases
among Alterra and its direct or indirect subsidiaries and
(c) leases necessary for governmental compliance), whether
or not such leases are capitalized).
Transfer Restrictions.
Without the prior written
consent of Merrill Lynch, which consent may be withheld in
Merrill Lynch's sole discretion, the borrowers may not
suffer or permit (i) the termination of any existing
management agreement or master lease or any change in the
manager or master tenant thereunder with respect to any project,
or (ii) any sale, transfer, lease or pledge of (a) all
or any portion of any of the Merrill Lynch projects or any
portion of the properties securing the Merrill Lynch mortgage
loan, (b) all or any portion of borrowers' right,
title and interest in and to any of the properties securing the
Merrill Lynch mortgage loan, or (c) any interest in the
borrowers, any master tenant or any guarantor or any interest in
any entity which holds a direct or indirect interest in, or
directly or indirectly controls, any borrower, master tenant or
guarantor. The Company has received Merrill Lynch's consent
to the consummation of this offering, as well as the applicable
formation transactions described in "Business —
History." In addition, if Alterra fails to continue to
control (x) the day-to-day management and operation of the
borrowers' business and (y) all material business
decisions of the borrowers during the term of the Merrill Lynch
mortgage loan, then Merrill
133
Lynch may, at its option, declare the Merrill Lynch mortgage
loan to be immediately due and payable in addition to exercising
any of its other remedies permitted by the Merrill Lynch loan
documents. Furthermore, without the consent of Merrill Lynch,
the borrowers may not engage in a transfer of shares
constituting an initial public offering of Alterra, or any
direct or indirect owner of 100% of the stock of Alterra, or
similar equity sale transaction, unless such shares of Alterra,
or such direct or indirect owner of 100% of the stock of
Alterra, are listed or approved for listing on the New York
Stock Exchange, the National Association of Securities Dealers
Automated Quotation System or the American Stock Exchange at the
time of such transfer.
Guaranty Bank Mortgage Loan
General.
Five subsidiaries of BLC are borrowers
under a loan made on March 30, 2005 by Guaranty Bank, GMAC
Commercial Mortgage Bank and GMAC Commercial Mortgage
Corporation, or the Guaranty mortgage loan, with a current
principal balance of $182.0 million. The notes evidencing
the loan include notes A, which evidence
$150.0 million of the principal amount, and notes B,
which evidence $32.0 million of the principal amount, each
of which bears a different interest rate, as further described
below. We intend to use a portion of the net proceeds we receive
from this offering to repay all of the $32.0 million
outstanding balance of the notes B. See "Use of
Proceeds." The loan matures on April 1, 2008, and the
borrowers have an option to extend the maturity date for up to
two 12-month terms, subject to (i) payment of an extension
fee in an amount equal to .25% of the principal amount for each
extension period, (ii) the properties securing the Guaranty
mortgage loan having achieved a debt coverage ratio (the ratio
of net operating income from the properties for the period in
question to debt service on the Guaranty mortgage loan for the
period in question) of at least 1.35 for the immediately
preceding six-month period, (iii) the properties having a
cumulative loan-to-value ratio (the ratio of (a) the sum of
the principal amount outstanding and all accrued but unpaid
interest thereon to (b) the appraised "as is"
value of the properties) of at least 75% as of the date the
notice of extension is provided, and (iv) the prior
reclassification of all of notes B into notes A, as
further described below.
Interest Rate.
The Guaranty mortgage loan has an
interest rate equal to the sum of (i) LIBOR plus
(ii) (a) for notes A prior to the first notes
resize (i.e., reclassification of certain notes B as
notes A), 3.05%, (b) for notes A, following the
first notes resize, 3.10%, (c) for notes B, 5.60%,
(d) for notes B, if the borrowers do not meet the
applicable debt coverage ratios or facility occupancy
requirements during the first year of the loan, 6.60%, and
(e) for notes B, if the borrowers do not meet the
applicable debt coverage ratios or facility occupancy
requirements from and after the second year of the loan, 7.60%.
Interest Rate Swap.
In connection with the
Guaranty mortgage loan we entered into three interest rate swaps
with LaSalle Bank, N.A. to hedge our interest rate risk and
convert the loan from a floating rate to a fixed rate. The swaps
have notional amounts of $85.0 million, $60.0 million
and $37.0 million, mature on March 22, 2012,
March 22, 2012 and March 25, 2008 and have fixed rates
of 4.66%, 4.775% and 4.395%, respectively. For the three swaps
we pay a fixed rate and receive one-month LIBOR.
Security for the Mortgage Loan.
The loan is
secured by (i) mortgage liens on the borrowers' fee
interests in five properties, and (ii) an unconditional
guaranty made by BLC to the lenders for 50% of the amount due
under the loan (such percentage to drop to 25% if certain
financial covenants are met) and for typical non-recourse carve
outs. As additional collateral for the obligations of the
borrowers under the Guaranty mortgage loan, borrowers maintain
with the lender cash or a letter of credit in the amount of
$2.5 million.
Payment Terms.
For the initial term of the
Guaranty mortgage loan, we are required to make monthly payments
in arrears of interest only on the outstanding principal balance
of the Guaranty mortgage loan. In the event that the borrowers
exercise their option to extend the term of the loan, in
addition to the regularly scheduled interest payments on the
principal amount of the Guaranty
134
mortgage loan, we are required to make a monthly principal
installment amount (as defined in the applicable loan documents).
Reclassification.
On or prior to February 15,
2006, the borrowers may request that all or a portion of the
notes B be reallocated as notes A, or resized,
effective as of April 1, 2006. The request will be granted
if no default exists at such time and if the debt coverage ratio
is at least 1.3:1.0 based upon the proposed resized notes A
and, with respect to the entire Guaranty mortgage loan, at least
1.1:1.0 based upon the proposed resized notes A and
notes B. On or prior to February 15, 2007, the
borrowers may request that all or a portion of the notes B
be resized, effective as of April 1, 2007. The request will
be granted if no default exists at such time and if the debt
coverage ratio is at least 1.45:1.0 based upon the proposed
resized notes A and, with respect to the entire Guaranty
mortgage loan, at least 1.15:1.0 based upon the proposed resized
notes A and notes B. To resize the notes on or after
April 1, 2008, all of the notes A must be resized to
include the notes B, and the borrowers must also satisfy
the conditions required to extend the maturity date of the
Guaranty mortgage loan, including satisfaction of debt coverage
ratios.
Required Ratios.
During the first year of the
Guaranty mortgage loan, the properties securing the Guaranty
mortgage loan must have achieved a debt coverage ratio of at
least 1.2:1.0 with respect to notes A and a debt coverage
ratio of at least 1.0:1.0 with respect to notes A and
notes B, in the aggregate, for each calendar quarter.
During each subsequent year, the facilities must have achieved a
debt coverage ratio of at least 1.25:1.0 concerning
notes A, and if notes B are outstanding, a debt
coverage ratio of at least 1.1:1.0 concerning notes A and
notes B, in the aggregate, for each calendar quarter.
During the first year of the Guaranty mortgage loan, the
facilities located on the properties securing the Guaranty
mortgage loan must have achieved a minimum aggregate occupancy
ratio (as defined in the applicable loan documents) of at least
75%. During each subsequent year, the facilities must have
achieved a minimum aggregate occupancy ratio of at least 80%. As
of June 30, 2005, the facilities' aggregate occupancy
ratio was 86.5%.
If the borrowers fail to maintain the required debt service
coverage ratio or the minimum aggregate occupancy ratio, we may,
at our option, prevent an event of default from occurring as a
result of such failure only by delivering to the lender a fee
and additional collateral equal to: (i) with respect to any
first failure, a fee in the amount of $100,000 and $500,000
pledged as additional collateral for the Guaranty mortgage loan,
and (ii) with respect to any second failure, a fee in an
amount equal to $150,000 and $1.0 million pledged as
additional collateral for the Guaranty mortgage loan.
Voluntary Prepayment.
After April 1, 2006,
with respect to notes A, and at any time, with respect to
notes B, the borrowers may prepay all or any part of the
principal amount outstanding, together with the payment of an
exit fee to the lender in the amount of 1% of the amount of
principal being repaid.
Capital Expenditures.
The borrowers are required
to expend a minimum of $300 per unit per year for capital
expenditures with respect to the properties securing the
Guaranty mortgage loan.
Certain Covenants.
The loan documents include
representations, warranties and covenants customary for mortgage
loans. Among other things, the borrowers are prohibited from
incurring or permitting to exist any additional indebtedness.
The loan documents also prohibit the sale or transfer of the
direct or indirect ownership interests in the properties
securing the Guaranty mortgage loan or the borrowers without the
lenders' agent's prior written consent, provided that
there are no restrictions on transfers of direct or indirect
ownership interests in BLC, subject to certain notice
requirements.
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GMAC Mortgage Loan
General.
Nine subsidiaries of FIT REN LLC, a
wholly owned subsidiary of Alterra and an affiliate of Fortress,
are borrowers under nine separate cross-collateralized and
cross-defaulted mortgage loans in an aggregate amount of
approximately $171.0 million, $151.4 million of which
was funded on June 21, 2005 in connection with the purchase
of eight facilities by GMAC Commercial Mortgage Corporation, or
the GMAC mortgage loans. The balance was funded on July 22,
2005, upon closing of the purchase of the ninth facility.
Security for the GMAC Mortgage Loans.
The GMAC
mortgage loans are secured by (i) mortgage liens on the
borrowers' fee interests in eight facilities and a ground
lease interest in one property, collectively comprising the
Prudential Portfolio, (ii) a security interest in
substantially all of the borrowers' fixtures, equipment and
personal property, (iii) a guaranty for typical
non-recourse carveouts by Alterra, (iv) an assignment of
leases, rents, lease guarantees and like profits arising from
the properties and (v) an assignment of each
borrower's rights under the applicable property management
agreements.
Interest Rate.
The GMAC mortgage loans have a
fixed interest rate equal to 5.38%.
Payment Terms.
For the first five years of the
GMAC mortgage loans, the borrowers are required to make monthly
payments of interest only. During the final two years, the
borrowers will also be required to make a monthly principal
amortization payment based upon the outstanding principal
balance of the GMAC mortgage loans, using a 25-year amortization
period.
Voluntary Prepayment.
The borrowers may prepay any
of the GMAC mortgage loans in whole, but not in part, at any
time during the first six and a half years of the GMAC mortgage
loans, provided that (i) the borrowers pay a prepayment fee
in an amount equal to the greater of 1% of the principal amount
being prepaid and the standard yield maintenance amount of the
Federal National Mortgage Association, or Fannie Mae; and
(ii) in connection with the release of the lien on any
individual property securing the GMAC mortgage loans, the
remaining properties, in the aggregate, maintain a debt service
coverage of at least 1.45:1.0. Any prepayment after the first
six and a half years, but before the last three months, of the
GMAC mortgage loans shall be subject to a prepayment premium
equal to 1% of the amount of principal being prepaid and no
prepayment fee shall be payable in connection with a prepayment
during the last three months of the GMAC mortgage loans.
Special Purpose Entities.
In connection with the
GMAC mortgage loans, the organizational documents of the
borrowers were amended to limit their purposes and to add
provisions consistent with the provisions of the organizational
documents of special purpose entities.
Certain Covenants.
The GMAC mortgage loan
documents include representations, warranties and covenants
customary for mortgage loans. Among other things, the borrowers
are prohibited from incurring additional indebtedness or further
encumbering their assets, unless Fannie Mae otherwise provides
additional financing. In addition, neither the properties
securing the GMAC mortgage loans nor the ownership interests in
the borrowers may be directly or indirectly transferred,
provided that such restriction does not apply to a direct or
indirect transfer of the ownership interests in the Company.
BLC Credit Facilities
General.
BLC is the borrower under unsecured lines
of credit in the aggregate amount of $28.6 million,
comprised of $18.6 million and $10.0 million credit
facilities, made on October 19, 2004 and March 30,
2005, respectively, by LaSalle Bank National Association,
collectively, the BLC Credit Facilities. The $18.6 million
credit facility consists of a $10.0 million line of credit
and $8.6 million in letters of credit. As of the date of
this prospectus, BLC had no outstanding balance under this
facility. The remainder of the BLC Credit Facilities is
comprised of a $10.0 million term loan, the proceeds of
which were used by BLC to make swap termination payments.
136
Interest Rate.
The BLC credit facilities bear
interest at the prime rate plus 1.00%.
Payment Terms.
The $18.6 million credit
facility is payable interest only. The $10.0 million term
loan is payable interest only monthly and principal in
consecutive quarterly installments of $0.5 million per
quarter, commencing July 1, 2005 until maturity.
Maturity Date.
The $18.6 million credit
facility matures on May 31, 2006. The $10.0 million
term loan matures on the earlier of May 31, 2007 or an
initial public offering. We intend to use a portion of the net
proceeds we receive from this offering to repay the
$10.0 million term loan in full. See "Use of
Proceeds."
Certain Covenants.
The BLC Credit Facilities
require BLC to maintain a minimum debt service coverage ratio
(as defined in the applicable loan document) of 1.0:1.0.
Pursuant to the BLC Credit Facilities, BLC also may not, among
other things, (i) dispose of any material portion of its
properties, (ii) create or incur non-ordinary course debt
that has not been disclosed on its financial statements as of
the date of the loan, (iii) encumber any real estate that
it owns, or proceeds thereof or (iv) enter into non-arms
length transaction with affiliates.
New Credit Facility
Prior to the closing of this offering, we intend to enter into a
short-term revolving credit facility that will provide
borrowings of up to $100.0 million; however, there can be
no assurance we will be able to obtain the credit facility or on
the terms described herein. The revolving credit facility is
expected to bear interest at the prime rate plus 1.00%. Net
proceeds from the borrowings under our revolving credit facility
are expected to be used to fund acquisitions.
We expect our new credit facility will contain various financial
covenants requiring us to maintain certain financial ratios.
Specifically, our new credit facility is expected to contain
financial covenants requiring us to maintain certain cash flow
requirements. In addition, the credit facility is expected to
contain various customary restrictive covenants that will limit
our and our subsidiaries' ability to, among other things,
pay dividends and incur additional indebtedness.
137
DESCRIPTION OF CAPITAL STOCK
General
As
of                     ,
2005, our authorized capital stock consisted of:
•
200,000,000 shares of common stock, par value
    $0.01 per share; and
•
50,000,000 shares of preferred stock, par value
    $0.01 per share.
Upon completion of this offering, there will be
outstanding                      shares
of common stock and no outstanding shares of preferred stock.
All of the currently outstanding shares of common stock are
validly issued, fully paid and non-assessable under the Delaware
General Corporation Law, or the DGCL.
Set forth below is a summary description of all the material
terms of our capital stock. This description is qualified in its
entirety by reference to our amended and restated certificate of
incorporation and amended and restated by-laws, a copy of each
of which is filed as an exhibit to the Registration Statement of
which this prospectus is a part.
Common Stock
Each holder of common stock is entitled to one vote for each
share of common stock held on all matters submitted to a vote of
stockholders. Except as provided with respect to any other class
or series of stock, the holders of our common stock will possess
the exclusive right to vote for the election of directors and
for all other purposes. The amended and restated certificate of
incorporation does not provide for cumulative voting in the
election of directors, which means that the holders of a
majority of the outstanding shares of common stock can elect all
of the directors standing for election, and the holders of the
remaining shares will not be able to elect any directors;
provided, however, that pursuant to the Stockholders Agreement
with FBA, Fortress Investment Trust II and Health Partners,
(i) FIG has the right to designate up to four directors to
serve on the board for so long as the Fortress Stockholders
beneficially own more than 50% of the voting power of the
Company and (ii) Health Partners has the right to designate
one director to serve on the board for so long as the
HP Stockholders beneficially own more than 5% of the voting
power of the Company. The Stockholders Agreement requires that
the Fortress Stockholders and the HP Stockholders vote or cause
to be voted all of its voting shares for the directors nominated
as described above.
Subject to any preference rights of holders of our preferred
stock that the Company may issue in the future, the holders of
our common stock are entitled to receive dividends, if any,
declared from time to time by our board of directors out of
legally available funds. In the event of our liquidation,
dissolution or winding up, the holders of our common stock are
entitled to share ratably in all assets remaining after the
payment of liabilities, subject to any rights of our holders of
preferred stock to prior distribution.
The holders of common stock have no preemptive, subscription,
redemption or conversion rights. Any shares of common stock sold
under this prospectus will be fully paid and non-assessable upon
issuance against full payment of the purchase price for such
shares. We intend to apply to list our common stock on the New
York Stock Exchange.
Preferred Stock
The board of directors has the authority, without action by our
stockholders, to issue preferred stock and to fix voting powers
for each class or series of preferred stock, and to provide that
any class or series may be subject to redemption, entitled to
receive dividends, entitled to rights upon
138
dissolution or convertible or exchangeable for shares of any
other class or classes of capital stock. The rights with respect
to a series or class of preferred stock may be greater than the
rights attached to our common stock. It is not possible to state
the actual effect of the issuance of any shares of our preferred
stock on the rights of holders of our common stock until our
board of directors determines the specific rights attached to
that preferred stock. The effect of issuing preferred stock
could include one or more of the following:
•
restricting dividends in respect of our common stock;
•
diluting the voting power of our common stock or providing that
    holders of preferred stock have the right to vote on matters as
    a class;
•
impairing the liquidation rights of our common stock; or
•
delaying or preventing a change of control of Brookdale.
Agreements with Stockholders
We have entered into agreements with certain of our stockholders
regarding voting and registration rights, among other things.
See "Certain Relationships and Related Party
Transactions — Agreements With Stockholders."
Anti-Takeover Effects of Delaware Law, Our Amended and
Restated Certificate of Incorporation and Our Amended and
Restated By-laws
The following is a summary of certain provisions of our amended
and restated certificate of incorporation and amended and
restated by-laws that may be deemed to have an anti-takeover
effect and may delay, deter or prevent a tender offer or
takeover attempt that a stockholder might consider to be in its
best interest, including those attempts that might result in a
premium over the market price for the shares held by
stockholders.
Authorized but Unissued Shares
The authorized but unissued shares of our common stock and our
preferred stock will be available for future issuance without
our stockholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of
authorized but unissued shares of our common stock and our
preferred stock could render more difficult or discourage an
attempt to obtain control over us by means of a proxy contest,
tender offer, merger or otherwise.
Delaware Business Combination Statute
We are organized under Delaware law. Some provisions of Delaware
law may delay or prevent a transaction which would cause a
change in our control.
Our amended and restated certificate of incorporation provides
that Section 203 of the DGCL, an anti-takeover law, will
not apply to us. In general, this statute prohibits a publicly
held Delaware corporation from engaging in a business
combination with an interested stockholder for a period of three
years after the date of the transaction by which that person
became an interested stockholder, unless the business
combination is approved in a prescribed manner. For purposes of
Section 203, a business combination includes a merger,
asset sale or other transaction resulting in a financial benefit
to the interested stockholder, and an interested stockholder is
a person who, together with affiliates and associates, owns, or
within three years prior, did own, 15% or more of voting stock.
139
Other Provisions of Our Amended and Restated Certificate
of Incorporation and Our Amended and Restated By-laws
Certain provisions of our amended and restated certificate of
incorporation may make a change in control of Brookdale more
difficult to effect. Our amended and restated certificate of
incorporation provides for a staggered board of directors
consisting of three classes of directors. Directors of each
class are chosen for three-year terms upon the expiration of
their current terms and each year one class of our directors
will be elected by our stockholders. The terms of the first,
second and third classes will expire in 2008, 2007 and 2006,
respectively. We believe that classification of our board of
directors will help to assure the continuity and stability of
our business strategies and policies as determined by our board
of directors. Additionally, there is no cumulative voting in the
election of directors, which means that the holders of a
majority of the outstanding shares of common stock can elect all
of the directors then standing for election, and the holders of
the remaining shares will not be able to elect any directors
(except Health Partners, which may designate one director to
serve on the board pursuant to the Stockholders Agreement,
provided that Health Partners continues to own at least 5% of
the Company — see "Certain Relationships and
Related Party Transactions — Agreements With
Stockholders"). The classified board provision could have
the effect of making the replacement of incumbent directors more
time consuming and difficult. At least two annual meetings of
stockholders, instead of one, will generally be required to
effect a change in a majority of our board of directors. Thus,
the classified board provision could increase the likelihood
that incumbent directors will retain their positions. The
staggered terms of directors may delay, defer or prevent a
tender offer or an attempt to change control of us, even though
a tender offer or change in control might be in the best
interest of our stockholders. In addition, our amended and
restated by-laws provide that directors may be removed only for
cause and only with the affirmative vote of at least 80% of the
voting interest of stockholders entitled to vote.
Pursuant to our amended and restated certificate of
incorporation, shares or our preferred stock may be issued from
time to time, and the board of directors is authorized to
determine and alter all rights, preferences, privileges,
qualifications, limitations and restrictions without limitation.
See "— Preferred Stock." Our amended and restated
by-laws also provide that our stockholders (with the exception
of the majority stockholder if Fortress owns at least 50% of the
then outstanding shares) are specifically denied the ability to
call a special meeting of the stockholders. Advance notice must
be provided by our stockholders to nominate persons for election
to our board of directors as well as to propose actions to be
taken at an annual meeting.
Limitations on Liability and Indemnification of Directors and
Officers
Our amended and restated certificate of incorporation and
amended and restated by-laws provide that our directors and
officers will not be personally liable to us or our stockholders
for monetary damages for breach of a fiduciary duty as a
director, except for:
•
any breach of the director's duty of loyalty to us or our
    stockholders;
•
intentional misconduct or a knowing violation of law;
•
liability under Delaware corporate law for an unlawful payment
    of dividends or an unlawful stock purchase or redemption of
    stock; or
•
any transaction from which the director derives an improper
    personal benefit.
Our amended and restated certificate of incorporation allows us
to indemnify our directors and officers to the fullest extent
permitted by Delaware law.
We have entered into indemnification agreements with certain of
our directors and executive officers. These provisions and
agreements may have the practical effect in some cases of
eliminating our stockholders' ability to collect monetary
damages from our directors and executive officers.
140
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing
provisions, we have been informed that, in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
Corporate Opportunity
Under Article Eight of our amended and restated certificate
of incorporation, FIT-ALT Investor, FBA, Fortress Investment
Trust II, Fortress Registered Investment Trust, Fortress
Brookdale Investment Fund LLC, and Health Partners, and
their respective subsidiaries and affiliates (collectively, the
"Significant Stockholders") have the right to, and
have no duty to abstain from, exercising such right to, engage
or invest in the same or similar business as us, do business
with any of our clients, customers or vendors or employ or
otherwise engage any of our officers, directors or employees. If
the Significant Stockholders or any of their officers, directors
or employees acquire knowledge of a potential transaction that
could be a corporate opportunity, they have no duty to offer
such corporate opportunity to us, our stockholders or
affiliates. We have renounced any interest or expectancy in, or
in being offered an opportunity to participate in, such
corporate opportunities in accordance with Section 122(17)
of the Delaware General Corporation Law.
In the event that any of our directors and officers who is also
a director, officer or employee of any of our Significant
Stockholders acquires knowledge of a corporate opportunity or is
offered a corporate opportunity, provided that this knowledge
was not acquired solely in such person's capacity as our
director or officer and such person acted in good faith, then
such person is deemed to have fully satisfied such person's
fiduciary duty and is not liable to us if any of the Significant
Stockholders pursues or acquires such corporate opportunity or
if such person did not present the corporate opportunity to us.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock
is           .
The telephone number
of           is           .
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our
common stock, and we cannot predict the effect, if any, that
market sales of shares or availability of any shares for sale
will have on the market price of our common stock prevailing
from time to time. Sales of substantial amounts of common stock
(including shares issued on the exercise of options, warrants or
convertible securities, if any) or the perception that such
sales could occur, could adversely affect the market price of
our common stock and our ability to raise additional capital
through a future sale of securities.
Upon completion of this offering, we will
have                      shares
of common stock outstanding (or a maximum
of                      shares
if the underwriters exercise their option to purchase additional
shares in full). All of
the                      shares
of common stock sold in this offering
(or                      shares
if the underwriters exercise their option to purchase additional
shares in full) will be freely tradable without restriction or
further registration under the Securities Act, unless such
shares are purchased by "affiliates" as that term is
defined in Rule 144 under the Securities Act. Subject to
certain contractual restrictions, holders of restricted shares
will be entitled to sell those shares in the public securities
markets if they qualify for an exemption from registration under
Rule 144 or any other applicable exemption under the
Securities Act. Subject to the lock-up agreements described
below and the provisions of Rules 144 and 144(k),
additional shares will be available for sale as set forth below.
141
On August 5, 2005, BLC granted 988 shares of stock and
FEBC-ALT Investors granted 3.33% of its membership interests to
certain members of our management, which shares and percentage
interests were subject to substantial risk of forfeiture until
the occurrence of certain events, as specified in the applicable
restricted stock or restricted securities award agreements. In
accordance with the terms of the plans, a portion of these
securities will no longer be subject to a risk of forfeiture
upon the consummation of this offering. In addition, the
remaining securities will vest over a five-year period following
the issuance if the executive remains continuously employed by
the Company. Securities that are subject to a risk of forfeiture
may not be sold or transferred. See "Business —
Equity Incentive Plans — Employee Restricted Stock
Plans." In connection with the formation transactions
described in "Business — History," these
shares were automatically converted into an aggregate of
2,577,652 shares of our common stock. These grants were
exempt from the registration requirements of the Securities Act
pursuant to Rule 701.
In addition to the outstanding shares of common stock, we intend
to file a registration statement on Form S-8 to register an
aggregate
of                      shares
of common stock reserved for issuance under our Omnibus Stock
Incentive Plan.
Lock-Up Agreements
The Company and its officers, directors and holders of
substantially all of the Company's common stock, including
the selling stockholders, have agreed with the underwriters,
subject to certain exceptions, not to dispose of or hedge any of
their common stock or securities convertible into or
exchangeable for shares of common stock during the period from
the date of this prospectus continuing through the date
120 days after the date of this prospectus, except with the
prior written consent of the representatives. This agreement
does not apply to any existing employee benefit plans.
The 120-day restricted period described in the preceding
paragraph will be automatically extended if (1) during the
last 17 days of the 120-day restricted period the Company
issues an earnings release or announces material news or a
material event or (2) prior to the expiration of the
120-day restricted period, the Company announces that it will
release earnings results during the 15-day period following the
last day of the 120-day restricted period, in which case the
restrictions described in the preceding paragraph will continue
to apply until the expiration of the 18-day period beginning on
the issuance of the earnings release of the announcement of the
material news or material event.
All participants in the directed shares program described under
"Underwriting" have also agreed to similar restriction
on the ability to sell their common stock.
Rule 144
In general, Rule 144 of the Securities Act as currently in
effect, provides that a person may sell within any three month
period a number of shares of the issuer that does not exceed the
greater of:
•
1% of the total number of such issuer's shares of common
    stock then outstanding, which, in our case, will equal
    approximately shares immediately after this offering; or
•
the average weekly trading volume of the common stock on the New
    York Stock Exchange during the four calendar weeks preceding the
    filing of notice on Form 144 with respect to the sale
subject to a requirement that any "restricted" shares
have been beneficially owned for at least one year, including
the holding period of any prior owner which was not an affiliate.
142
An "affiliate" is a person that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with an issuer.
Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of
current public information about us.
Rule 144(k)
Under Rule 144(k) of the Securities Act, a person (or
persons whose shares are aggregated) who is not deemed to have
been our affiliate at any time during the three months preceding
a sale, and who has beneficially owned the shares proposed to be
sold for at least two years (including the holding period of any
prior owner other than an affiliate), is entitled to sell these
shares under Rule 144(k) without complying with the manner
of sale, public information, volume limitation or notice
provisions of Rule 144. Therefore, unless otherwise
restricted, "144(k)" shares may be sold immediately
upon completion of this offering.
143
MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX
CONSIDERATIONS TO NON-U.S. HOLDERS
The following discussion is a summary of the material
U.S. federal income tax considerations generally applicable
to the purchase, ownership and disposition of our common stock
by Non-U.S. Holders (as defined below). This summary deals
only with our common stock held as capital assets by holders who
purchase common stock in this offering. This discussion does not
cover all aspects of U.S. federal income taxation that may
be relevant to the purchase, ownership or disposition of our
common stock by prospective investors in light of their
particular circumstances. In particular, this discussion does
not address all of the tax considerations that may be relevant
to certain types of investors subject to special treatment under
U.S. federal income tax laws, such as:
•
dealers in securities or currencies;
•
financial institutions;
•
regulated investment companies;
•
real estate investment trusts;
•
tax-exempt entities;
•
insurance companies;
•
persons holding common stock as part of a hedging, integrated,
    conversion or constructive sale transaction or a straddle;
•
traders in securities that elect to use a mark-to-market method
    of accounting for their securities holdings;
•
persons liable for alternative minimum tax;
•
U.S. expatriates;
•
partnerships or entities or arrangements treated as a
    partnership or other pass-through entity for U.S. federal
    tax purposes (or investors therein); or
•
U.S. Holders (as defined below).
Furthermore, this summary is based upon the provisions of the
Internal Revenue Code of 1986, as amended, or the Code, the
Treasury regulations promulgated thereunder and administrative
and judicial interpretations thereof, all as of the date hereof.
Such authorities may be repealed, revoked, modified or subject
to differing interpretations, possibly on a retroactive basis,
so as to result in U.S. federal income tax consequences
different from those discussed below. We have not received a
ruling from the Internal Revenue Service, or the IRS, with
respect to any of the matters discussed herein. This discussion
does not address any state, local or non-U.S. tax
considerations.
For purposes of this summary, a "U.S. Holder"
means a beneficial owner of our common stock that is for
U.S. federal income tax purposes one of the following:
•
a citizen or an individual resident of the United States;
•
a corporation (or other entity taxable as a corporation) created
    or organized in or under the laws of the United States or any
    state thereof or the District of Columbia;
•
an estate the income of which is subject to U.S. federal
    income taxation regardless of its source; or
•
a trust if it (i) is subject to the primary supervision of
    a court within the United States and one or more persons have
    the authority to control all substantial decisions of the trust
    or (ii) has a valid election in effect under applicable
    U.S. Treasury regulations to be treated as a
    U.S. person.
144
If a partnership or other entity or arrangement treated as a
partnership for U.S. federal income tax purposes holds our
common stock, the U.S. federal income tax treatment of a
partner in such partnership will generally depend upon the
status of the partner and the activities of the partnership. If
you are a partnership or a partner of a partnership holding our
common stock, we particularly urge you to consult your own tax
advisors.
If you are considering the purchase of our common stock, we
urge you to consult your own tax advisors concerning the
particular U.S. federal income tax consequences to you of
the purchase, ownership and disposition of our common stock, as
well as any consequences to you arising under state, local and
non-U.S. tax laws.
The following discussion applies only to Non-U.S. Holders.
A "Non-U.S. Holder" is a beneficial owner of our
common stock (other than a partnership or an entity or
arrangement treated as a partnership for U.S. federal
income tax purposes) that is not a U.S. Holder. Special
rules may apply to you if you are a "controlled foreign
corporation" or a "passive foreign investment
company" or are otherwise subject to special treatment
under the Code. Any such holders should consult their own tax
advisors to determine the U.S., federal income, state, local and
non-U.S. tax consequences that may be relevant to them.
Dividends
Dividends paid to you (to the extent paid out of our current or
accumulated earnings and profits, as determined for
U.S. federal income tax purposes) generally will be subject
to U.S. federal withholding tax at a 30% rate or such lower
rate as may be specified by an applicable tax treaty. However,
dividends that are effectively connected with a trade or
business you conduct within the United States, or, if certain
tax treaties apply, are attributable to a permanent
establishment you maintain in the United States, are not subject
to the U.S. federal withholding tax, but instead are
subject to U.S. federal income tax on a net income basis at
the applicable graduated individual or corporate rates. Special
certification and disclosure requirements must be satisfied for
effectively connected income to be exempt from withholding. If
you are a corporation, any such effectively connected dividends
that you receive may be subject to an additional branch profits
tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
If you wish to claim the benefit of an applicable treaty rate
for dividends paid on our common stock, you must provide the
withholding agent with a properly executed IRS Form W-8BEN,
claiming an exemption from or reduction in withholding under the
applicable income tax treaty. In the case of common stock held
by a foreign intermediary (other than a "qualified
intermediary"), the intermediary generally must provide an
IRS Form W-8IMY and attach thereto an appropriate
certification by each beneficial owner for which it is receiving
the dividends.
If you are eligible for a reduced rate of U.S. federal
withholding tax pursuant to an applicable income tax treaty, you
may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the IRS.
Sale, Exchange or Other Taxable Disposition of Common
    Stock
You generally will not be subject to U.S. federal income
tax with respect to gain recognized on a sale, exchange or other
taxable disposition of shares of our common stock unless:
•
the gain is effectively connected with your conduct of a trade
    or business in the United States, or, if certain tax treaties
    apply, is attributable to a permanent establishment you maintain
    in the United States;
•
if you are an individual and hold shares of our common stock as
    a capital asset, you are present in the United States for 183 or
    more days in the taxable year of the sale, exchange or other
    taxable disposition, and you have a "tax home" in the
    United States; or
145
•
we are or have been a "United States real property holding
    corporation" for U.S. federal income tax purposes at
    any time during the shorter of the five-year period preceding
    such disposition and your holding period in the common stock,
    and (i) you beneficially own, or have owned, more than 5%
    of the total fair market value of our common stock at any time
    during the five-year period preceding such disposition, or
    (ii) our common stock has ceased to be traded on an
    established securities market prior to the beginning of the
    calendar year in which the sale or disposition occurs.
If you are an individual and are described in the first bullet
above, you will be subject to tax on any gain derived from the
sale, exchange or other taxable disposition under regular
graduated U.S. federal income tax rates. If you are an
individual and are described in the second bullet above, you
will be subject to a flat 30% tax on any gain derived from the
sale, exchange or other taxable disposition that may be offset
by U.S. source capital losses (even though you are not
considered a resident of the United States). If you are a
corporation and are described in the first bullet above, you
will be subject to tax on your gain under regular graduated
U.S. federal income tax rates and, in addition, may be
subject to the branch profits tax on your effectively connected
earnings and profits for the taxable year, which would include
such gain, at a rate of 30% or at such lower rate as may be
specified by an applicable income tax treaty, subject to
adjustments.
We believe that we may be a "United States real property
holding corporation" for U.S. federal income tax
purposes. Generally, a corporation is a U.S. real property
holding corporation if the fair market value of its
U.S. real property interest, as defined in the Code and
applicable regulations, equals or exceeds 50% of the aggregate
fair market value of its worldwide real property interests and
its other assets used or held for use in a trade or business. If
we are a United States real property holding corporation and you
are a holder of greater than 5% of the total fair market value
of our common stock, you should consult your tax advisor.
U.S. Federal Estate Tax
Shares of our common stock held by an individual
Non-U.S. Holder at the time of his or her death will be
included in such Non-U.S. Holder's gross estate for
U.S. federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
You may be subject to information reporting and backup
withholding with respect to any dividends on, and the proceeds
from dispositions of, our common stock paid to you, unless you
comply with certain reporting procedures (usually satisfied by
providing an IRS Form W-8BEN) or otherwise establish an
exemption. Additional rules relating to information reporting
requirements and backup withholding with respect to the payment
of proceeds from the disposition of shares of our common stock
will apply as follows:
•
If the proceeds are paid to or through the U.S. office of a
    broker (U.S. or foreign), they generally will be subject to
    backup withholding and information reporting, unless you certify
    that you are not a U.S. person under penalties of perjury
    (usually on an IRS Form W-8BEN) or otherwise establish an
    exemption;
•
If the proceeds are paid to or through a non-U.S. office of
    a broker that is not a U.S. person and is not a foreign
    person with certain specified U.S. connections, or a
    U.S. Related Person, they will not be subject to backup
    withholding or information reporting; or
•
If the proceeds are paid to or through a non-U.S. office of
    a broker that is a U.S. person or a U.S. Related
    Person, they generally will be subject to information reporting
    (but not backup withholding), unless you certify that you are
    not a U.S. person under penalties of perjury (usually on an
    IRS Form W-8BEN) or otherwise establish an exemption.
146
In addition, the amount of any dividends paid to you and the
amount of tax, if any, withheld from such payment generally must
be reported annually to you and the IRS. The IRS may make such
information available under the provisions of an applicable
income tax treaty to the tax authorities in the country in which
you reside.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against your U.S. federal
income tax liability provided the required information is timely
furnished by you to the IRS. Non-U.S. Holders should
consult their own tax advisors regarding the filing of a
U.S. tax return for claiming a refund of such backup
withholding.
147
UNDERWRITING
The Company, the selling stockholders and the underwriters named
below have entered into an underwriting agreement with respect
to the shares being offered. Subject to certain conditions, each
underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman,
Sachs & Co. and Lehman Brothers Inc. are the
representatives of the underwriters.
Underwriters
Number of Shares
Goldman, Sachs & Co.
Lehman Brothers Inc.
Total
The underwriters are committed to take and pay for all of the
shares being offered, if any are taken, other than the shares
covered by the option described below unless and until this
option is exercised.
If the underwriters sell more shares than the total number set
forth in the table above, the underwriters have an option to buy
up to an
additional                      shares
from the Company to cover such sales. They may exercise that
option for 30 days. If any shares are purchased pursuant to
this option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table
above.
The following tables show the per share and total underwriting
discounts and commissions to be paid to the underwriters by the
Company and the selling stockholders. Such amounts are shown
assuming both no exercise and full exercise of the
underwriters' option to purchase  additional shares.
Paid by the Company
No Exercise
Full Exercise
Per Share
$
$
Total
$
$
Paid by the Selling Stockholders
No Exercise
Full Exercise
Per Share
$
$
Total
$
$
Shares sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the
cover of this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to
$           per
share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount
of up to
$           per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms.
The Company and its officers, directors and holders of
substantially all of the Company's common stock, including
the selling stockholders, have agreed with the underwriters,
subject to certain exceptions, not to dispose of or hedge any of
their common stock or securities convertible into or
exchangeable for shares of common stock during the period from
the date of this prospectus continuing through the date
120 days after the date of this prospectus, except with the
prior written consent of the representatives. This agreement
does not apply to any existing employee benefit plans. See
"Shares Eligible for Future Sale" for a discussion of
certain transfer restrictions.
The 120-day restricted period described in the preceding
paragraph will be automatically extended if (1) during the
last 17 days of the 120-day restricted period the Company
issues an earnings release or announces material news or a
material event or (2) prior to the expiration of the
120-day restricted period, the Company announces that it will
release earnings results during the 15-day period following the
last day of the 120-day restricted period, in which case the
restrictions
148
described in the preceding paragraph will continue to apply
until the expiration of the 18-day period beginning on the
issuance of the earnings release of the announcement of the
material news or material event.
Prior to the offering, there has been no public market for the
shares. The initial public offering price has been negotiated
among the Company and the representatives. Among the factors to
be considered in determining the initial public offering price
of the shares, in addition to prevailing market conditions, will
be the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an
assessment of the Company's management and the
consideration of the above factors in relation to market
valuation of companies in related businesses.
An application has been made to list the common stock on the New
York Stock Exchange under the symbol "BKD". In order
to meet one of the requirements for listing the common stock on
the NYSE, the underwriters have undertaken to sell lots of 100
or more shares to a minimum of 2,000 beneficial holders.
In connection with the offering, the underwriters may purchase
and sell shares of common stock in the open market. These
transactions may include short sales, stabilizing transactions
and purchases to cover positions created by short sales. Shorts
sales involve the sale by the underwriters of a greater number
of shares than they are required to purchase in the offering.
"Covered" short sales are sales made in an amount not
greater than the underwriters' option to purchase
additional shares from the Company in the offering. The
underwriters may close out any covered short position by either
exercising their option to purchase additional shares or
purchasing shares in the open market. In determining the source
of shares to close out the covered short position, the
underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to
the price at which they may purchase additional shares pursuant
to the option granted to them. "Naked" short sales are
any sales in excess of such option. The underwriters must close
out any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
after pricing that could adversely affect investors who purchase
in the offering. Stabilizing transactions consist of various
bids for or purchases of common stock made by the underwriters
in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have repurchased shares sold by or for the
account of such underwriter in stabilizing or short covering
transactions.
Purchases to cover a short position and stabilizing transactions
may have the effect of preventing or retarding a decline in the
market price of the Company's common stock, and, together
with the imposition of the penalty bid, may stabilize, maintain
or otherwise affect the market price of the common stock. As a
result, the price of the common stock may be higher than the
price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued at any time.
These transactions may be effected on the New York Stock
Exchange, in the over-the-counter market or otherwise.
Each of the underwriters has represented and agreed that:
(a) it has not made or will not make an offer of shares to
the public in the United Kingdom within the meaning of
section 102B of the Financial Services and Markets Act 2000
(as amended) (FSMA) except to legal entities which are
authorised or regulated to operate in the financial markets or,
if not so authorised or regulated, whose corporate purpose is
solely to invest in securities or otherwise in circumstances
which do not require the publication by the company of a
prospectus pursuant to the Prospectus Rules of the Financial
Services Authority (FSA);
149
(b) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of section 21 of FSMA) to persons who have
professional experience in matters relating to investments
falling within Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 or in
circumstances in which section 21 of FSMA would not, if the
company were not an authorised person, apply to the company; and
(c) it has complied with, and will comply with all
applicable provisions of FSMA with respect to anything done by
it in relation to the shares in, from or otherwise involving the
United Kingdom.
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a Relevant
Member State), each underwriter has represented and agreed that
with effect from and including the date on which the Prospectus
Directive is implemented in that Relevant Member State (the
Relevant Implementation Date) it has not made and will not make
an offer of Shares to the public in that Relevant Member State
prior to the publication of a prospectus in relation to the
Shares which has been approved by the competent authority in
that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent
authority in that Relevant Member State, all in accordance with
the Prospectus Directive, except that it may, with effect from
and including the Relevant Implementation Date, make an offer of
Shares to the public in that Relevant Member State at any time:
(a) to legal entities which are authorised or regulated to
operate in the financial markets or, if not so authorised or
regulated, whose corporate purpose is solely to invest in
securities;
(b) to any legal entity which has two or more of (1) an
average of at least 250 employees during the last financial
year; (2) a total balance sheet of more than
€
43,000,000 and (3) an
annual net turnover of more than
€
50,000,000, as shown
in its last annual or consolidated accounts; or
(c) in any other circumstances which do not require the
publication by the Issuer of a prospectus pursuant to
Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an
"offer of Shares to the public" in relation to any
Shares in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the Shares to be offered so as to enable an
investor to decide to purchase or subscribe the Shares, as the
same may be varied in that Relevant Member State by any measure
implementing the Prospectus Directive in that Relevant Member
State and the expression Prospectus Directive means
Directive 2003/71/EC and includes any relevant implementing
measure in each Relevant Member State.
The shares may not be offered or sold by means of any document
other than to persons whose ordinary business is to buy or sell
shares or debentures, whether as principal or agent, or in
circumstances which do not constitute an offer to the public
within the meaning of the Companies Ordinance
(Cap. 32) of Hong Kong, and no advertisement,
invitation or document relating to the shares may be issued,
whether in Hong Kong or elsewhere, which is directed at, or the
contents of which are likely to be accessed or read by, the
public in Hong Kong (except if permitted to do so under the
securities laws of Hong Kong) other than with respect to shares
which are or are intended to be disposed of only to persons
outside Hong Kong or only to "professional investors"
within the meaning of the Securities and Futures Ordinance
(Cap. 571) of Hong Kong and any rules made thereunder.
This prospectus has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus
and any other document or material in connection with the offer
or sale, or invitation or subscription or purchase, of the
securities may not be circulated or distributed, nor may the
securities be offered or sold, or be made the subject of an
invitation for subscription or purchase, whether directly or
indirectly, to persons in Singapore other than under
circumstances in which such offer, sale or invitation does not
constitute an offer or sale, or invitation for subscription or
purchase, of the securities to the public in Singapore.
150
The securities have not been and will not be registered under
the Securities and Exchange Law of Japan (the Securities and
Exchange Law) and each underwriter has agreed that it will not
offer or sell any securities, directly or indirectly, in Japan
or to, or for the benefit of, any resident of Japan (which term
as used herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan),
or to others for re-offering or resale, directly or indirectly,
in Japan or to a resident of Japan, except pursuant to an
exemption from the registration requirements of, and otherwise
in compliance with, the Securities and Exchange Law and any
other applicable laws, regulations and ministerial guidelines of
Japan.
The underwriters do not expect sales to discretionary accounts
to exceed five percent of the total number of shares offered.
The Company and the selling stockholders estimate that their
share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately
$          .
The Company and the selling stockholders have agreed to
indemnify the several underwriters against certain liabilities,
including liabilities under the Securities Act.
Certain of the underwriters and their respective affiliates
have, from time to time, performed, and may in the future
perform, various financial advisory and investment banking
services for the Company, for which they received or will
receive customary fees and expenses.
LEGAL MATTERS
Certain legal matters will be passed upon for us by Skadden,
Arps, Slate, Meagher & Flom LLP, and for the
underwriters by Willkie Farr & Gallagher LLP. Both
Skadden, Arps, Slate, Meagher & Flom LLP and Willkie
Farr & Gallagher LLP also represent Fortress on a
variety of past and current matters.
EXPERTS
The balance sheet of Brookdale Senior Living Inc. as of
July 1, 2005, and the combined financial statements of
Brookdale/ Alterra, the Fortress CCRC Portfolio and the
Prudential Portfolio as of December 31, 2004 and 2003, and
for each of the three years in the period ended
December 31, 2004 appearing in this prospectus and
registration statement have been audited by Ernst &
Young LLP, an independent registered public accounting firm, as
set forth in their reports thereon appearing elsewhere in this
prospectus, and are included in reliance upon such reports given
on the authority of such firm as experts in accounting and
auditing.
The consolidated balance sheet of Alterra Healthcare Corporation
as of December 31, 2002 and consolidated income statements,
statements of stockholder's equity and statements of cash
flows for the eleven months ended November 30, 2003 and the
year ended December 31, 2002 appearing in this prospectus
and registration statement have been audited by KPMG LLP, an
independent registered public accounting firm, as set forth in
their reports thereon appearing elsewhere in this prospectus,
and are included in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
The audit report covering the December 31, 2002
consolidated financial statements contains an explanatory
paragraph that Alterra emerged from Chapter 11 bankruptcy
on December 4, 2003. Upon emergence from bankruptcy,
Alterra changed its basis of financial statement presentation to
reflect the adoption of fresh start accounting in accordance
with AICPA Statement of Position 90-7,
Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement, of which this prospectus
is a part, on Form S-1 with the Securities and Exchange
Commission relating to this offering. This prospectus does not
contain all of the information in the registration statement and
the exhibits and financial statements included with
151
the registration statement. References in this prospectus to any
of our contracts, agreements or other documents are not
necessarily complete, and you should refer to the exhibits
attached to the registration statement for copies of the actual
contracts, agreements or documents. You may read and copy the
registration statement, the related exhibits and other material
we file with the Commission at the Commission's public
reference room in Washington, D.C. at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can also request copies of
those documents, upon payment of a duplicating fee, by writing
to the Commission. Please call the Commission at 1-800-SEC-0330
for further information on the operation of the public reference
rooms. The Commission also maintains a website that contains
reports, proxy and information statements and other information
regarding issuers that file with the Commission. The website
address is http://www.sec.gov. You may also request a copy of
these filings, at no cost, by writing or telephoning us as
follows: Brookdale Senior Living Inc., 330 North Wabash,
Suite 1400, Chicago, Illinois, 60611, (312) 977-3700.
Upon the effectiveness of the registration statement, we will be
subject to the informational requirements of the Exchange Act,
and, in accordance with the Exchange Act, will file reports,
proxy and information statements and other information with the
Commission. Such annual, quarterly and special reports, proxy
and information statements and other information can be
inspected and copied at the locations set forth above. We will
report our financial statements on a year ended
December 31. We intend to furnish our stockholders with
annual reports containing consolidated financial statements
audited by our independent an independent registered public
accounting firm and with quarterly reports containing unaudited
consolidated financial statements for each of the first three
quarters of each fiscal year.
152
BROOKDALE SENIOR LIVING INC.
INDEX
Unaudited
    Pro Forma Condensed Financial Information
General Information
F-2
Unaudited Pro
    Forma Condensed Consolidated Balance Sheet as of March 31,
    2005
F-3
Unaudited Pro
    Forma Condensed Consolidated Statement of Operations for the
    year ended December 31, 2004
F-4
Unaudited Pro Forma Condensed
    Consolidated Statement of Operations for the three months ended
    March 31, 2005
F-5
Notes and
    Management's Assumption to Unaudited Pro Forma Condensed
    Consolidated Financial Statements
F-6
Schedule
    I — Unaudited Pro Forma Statement of Operations, GAAP
    EBITDA, Adjusted EBITDA and Cash Earnings
F-15
Brookdale Senior Living
    Inc.
Report of
    Independent Registered Public Accounting Firm
F-16
Balance Sheet
    as of July 1, 2005
F-17
Notes to
    Balance Sheet
F-18
Brookdale/ Alterra (Predecessor
    Company)
Report of
    Independent Registered Public Accounting Firm
F-19
Combined
    Balance Sheets
F-20
Combined
    Statements of Operations
F-21
Combined
    Statements of Stockholders' Equity
F-22
Combined
    Statements of Cash Flows
F-23
Notes to
    Combined Financial Statements
F-27
Schedule II —
    Valuation and Qualifying Accounts
F-51
Fortress CCRC
    Portfolio
Report of
    Independent Registered Public Accounting Firm
F-52
Combined
    Statements of Financial Position
F-53
Combined
    Statements of Activities and Changes in Net Deficit
F-54
Combined
    Statements of Cash Flows
F-55
Notes to
    Combined Financial Statements
F-57
Prudential Portfolio
Report of
    Independent Registered Public Accounting Firm
F-64
Combined
    Balance Sheets
F-65
Combined
    Statements of Operations
F-66
Combined
    Statements of Members' Equity
F-67
Combined
    Statements of Cash Flows
F-68
Notes to
    Combined Financial Statements
F-69
Alterra Healthcare
    Corporation
Report of
    Independent Registered Public Accounting Firm
F-74
Consolidated
    Balance Sheets
F-75
Consolidated
    Statements of Operations
F-76
Consolidated
    Statements of Changes in Stockholders' Equity (Deficit)
F-77
Consolidated
    Statements of Cash Flows
F-78
Notes to
    Consolidated Financial Statements
F-80
F-1
GENERAL INFORMATION
The following unaudited pro forma condensed consolidated
financial information sets forth the historical financial
information as of and for the three months ended March 31,
2005 and for the year ended December 31, 2004 derived from
the audited financial statements of our predecessor, Brookdale/
Alterra, as adjusted to give effect to:
•
pro forma adjustments to give effect to the Provident sale
    leaseback and Ventas operating lease on the combined statement
    of operations as if these transactions closed on January 1,
    2004;
•
pro forma adjustments to give effect to the refinancing of five
    facilities, tax effect of the purchase of four of these
    facilities and termination of forward interest rate swaps as if
    these transactions closed on January 1, 2005 and 2004;
•
pro forma adjustments to give effect to the CCRC Portfolio and
    Renaissance Portfolio acquisitions on the combined balance sheet
    as if these transactions closed on March 31, 2005;
•
pro forma adjustments to give effect to the Fortress CCRC
    Portfolio and the Prudential Portfolio acquisitions on the
    combined statements of operations as if these transactions
    closed on January 1, 2004;
•
pro forma adjustment to give effect to the step-up in basis of
    minority interest ownership due to majority stockholders'
    acquiring a portion of the minority interest and the exchanges
    of Brookdale/Alterra minority ownership for Company ownership.
•
pro forma adjustment to give effect to the compensation expense
    in connection with the grants under the stock plan.
•
incremental general and administrative expenses related to
    operating as a public company; and
•
our initial public offering, repayment of indebtedness and other
    use of proceeds.
You should read the information below along with all other
financial information and analysis presented in this prospectus,
including the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and Brookdale/ Alterra's combined
historical financial statements and related notes included
elsewhere in this prospectus. The unaudited pro forma condensed
combined financial information is presented for informational
purposes only, and we do not expect that this information will
reflect our future results of operations or financial position.
The unaudited pro forma adjustments are based on available
information and upon assumptions that we believe are reasonable.
The unaudited pro forma financial information assumes that the
transactions and our initial offering were completed as of
March 31, 2005 for purposes of unaudited pro forma
condensed combined balance sheet and as of January 1, 2005
and 2004 for purposes of the unaudited pro forma condensed
combined statement of operations.
F-2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 2005
(Unaudited, in thousands)
Brookdale
Historical
Initial
Pro
Senior
Brookdale/
Other
Public
Forma, as
Living(A)
Alterra(A)
Acquisitions(D)
Adjustments
Pro Forma
Offering(C)
Adjusted
Assets:
Cash
$
1
$
76,083
$
2,898
$
2,500
(M)
61,482
$
$
(20,000
)(N)
Cash and investment- restricted
—
20,490
—
—
20,490
—
20,490
Accounts receivables, net
—
7,063
—
—
7,063
—
7,063
Assets held for sale
—
2,785
11,500
(2,500
)(M)
11,785
—
11,785
Other current assets
—
13,690
556
—
14,246
14,246
Total current assets
1
120,111
14,954
(20,000
)
115,066
Property plant and equipment, net
—
523,890
477,923
—
1,001,813
119,581
1,121,394
Cash and investments- restricted
—
22,419
8,665
—
31,084
(1,000
)
30,084
Investments in unconsolidated
    ventures
—
14,713
—
—
14,713
—
14,713
Deferred costs
—
4,003
—
4,003
—
4,003
Other assets
—
48,287
—
—
48,287
(5,517
)
42,770
Total assets
$
1
$
729,420
$
505,545
$
(20,000
)
1,214,966
$
$
Liabilities and
    Shareholders' Equity:
Current portion of debt
$
—
$
4,606
$
—
$
—
4,606
$
(1,296
)
$
3,310
Current obligations on assets held
    for sale
—
—
750
—
750
—
750
Trade accounts payable
—
6,889
—
—
6,889
—
6,889
Accrued expenses and other
    liabilities
—
98,017
4,218
—
102,235
—
102,235
Total current liabilities
—
109,512
4,968
—
114,480
(1,296
)
113,184
Mortgage and other indebtedness
—
312,385
276,756
—
589,141
(51,010
)
538,131
Capitalized lease obligation
—
66,284
—
—
66,284
—
66,284
Deferred gains
—
136,107
—
—
136,107
(58,882
)
77,225
Refundable entrance fees
—
—
24,292
—
24,292
—
24,292
Other
—
38,491
—
—
38,491
(8,248
)
30,243
Minority interests
—
36
—
—
36
—
36
Total liabilities
—
662,815
306,016
—
968,831
(119,436
)
849,395
Commitment and contingencies
Shareholders' equity
1
66,605
199,529
(20,000
)(N)
246,135
Total liabilities and
    Shareholders' equity
$
1
$
729,420
$
505,545
$
(20,000
)
1,214,966
$
$
See accompanying notes.
F-3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
For the Year Ended December 31, 2004
(Unaudited, in thousands, except per share amounts)
Brookdale/
Historical
Alterra
Initial
Brookdale/
Transaction
Other
Public
Pro Forma,
Alterra
Adjustments
Acquisitions
Pro Forma
Offering
As
(A)
(B)
(D)
Adjustments
Pro Forma
(C)
Adjusted
Revenue:
Resident fees
$
657,327
$
9,760
$
116,759
$
—
$
783,846
$
—
$
783,846
Management fees
3,545
648
—
250
(I)
4,443
4,443
Amortization of entrance fees
—
—
1,953
—
1,953
—
1,953
Total revenues
660,872
10,408
118,712
250
790,242
—
790,242
Operating Expenses:
Facility operating
415,169
5,968
83,508
(11,545
)(F)
493,100
—
493,100
General and administrative
43,640
—
2,000
(2,407
)(G)
43,233
—
43,233
Compensation Expense
—
—
—
10,114
(H)
10,114
10,114
Facility lease expense
99,997
80,382
1,008
—
181,387
2,219
183,606
Depreciation and amortization
52,307
(20,667
)
30,070
1,000
(E)
62,710
8,117
70,827
Total operating expenses
611,113
65,683
116,586
(2,838
)
790,544
10,336
800,880
Operating Income
49,759
(55,275
)
2,126
3,088
(302
)
(10,336
)
(10,638
)
Interest income
637
—
—
545
(K)
1,182
—
1,182
Interest Expense:
Debt
(55,851
)
30,389
(16,196
)
(83
)(E)
(41,741
)
4,105
(37,636
)
Capitalized lease obligation
(7,783
)
—
—
—
(7,783
)
—
(7,783
)
Change in fair value of derivatives
3,176
—
—
(3,176
)(J)
—
—
—
Gain (loss) on extinguishment of
    debt
1,051
—
—
(788
)(E)
263
—
263
Equity in earnings of
    unconsolidated ventures
(931
)
—
—
—
(931
)
—
(931
)
Other
(114
)
—
—
(114
)
—
(114
)
Income (loss) before taxes
(10,056
)
(24,886
)
(14,070
)
(414
)
(49,426
)
(6,231
)
(55,657
)
Provision for income taxes
(11,111
)
7,190
—
—
(L)
(3,921
)
—
(3,921
)
Income (loss) before discounted
    operations
(21,167
)
(17,696
)
(14,070
)
(414
)
(53,347
)
(6,231
)
(59,578
)
Discontinued operations
(722
)
—
753
—
31
—
31
Net income (loss)
$
(21,889
)
$
(17,696
)
$
(13,317
)
$
(414
)
$
(53,316
)
$
(6,231
)
$
(59,547
)
Weighted average shares outstanding
Income (loss) per share:
Continuing operations
$
Discontinued operations
Net income (loss)
$
See accompanying notes.
F-4
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
For the Three Months ended March 31, 2005
(Unaudited, in thousands, except per share amounts)
Historical
Other
Initial
Brookdale/
Pro Forma
Public
Pro Forma,
Alterra(A)
Acquisitions(D)
Adjustments
Pro Forma
Offering(C)
As Adjusted
Revenue
Resident fees
$
174,112
$
29,152
$
—
$
203,264
$
—
$
203,264
Management fees
871
—
63
(I)
934
—
934
Amortization of entrance fees
—
464
—
464
—
464
Total revenues
174,983
29,616
63
204,662
—
204,662
Operating Expenses:
Facility operating
110,328
20,600
(2,886
)(F)
128,042
—
128,042
General and administrative
11,433
500
(602
)(G)
11,331
—
11,331
Compensation expense
—
—
2,528
(H)
2,528
—
2,528
Facility lease expense
46,502
252
—
46,754
498
47,252
Depreciation and amortization
5,596
7,518
128
(E)
13,242
2,021
15,263
Total operating expenses
173,859
28,870
(832
)
201,897
2,519
204,416
Operating Income
1,124
746
895
2,765
(2,519
)
246
Interest income
362
—
73
(K)
435
—
435
Interest Expense:
Debt
(6,623
)
(4,049
)
111
(E)
(10,561
)
1,030
(9,531
)
Capitalized lease obligation
(2,276
)
—
—
(2,276
)
—
(2,276
)
Change in fair value of derivatives
4,062
—
(4,062
)(J)
—
—
—
Loss on extinguishment of debt
(453
)
—
(172
)(E)
(625
)
—
(625
)
Equity in earnings of
    unconsolidated ventures
(187
)
—
—
(187
)
—
(187
)
Other
(246
)
—
—
(246
)
—
(246
)
Income (loss) before taxes
(4,237
)
(3,303
)
(3,155
)
(10,695
)
(1,489
)
(12,184
)
Provision for income taxes
(166
)
—
—
(L)
(166
)
—
(166
)
Income (loss) before discounted
    operations
(4,403
)
(3,303
)
(3,155
)
(10,861
)
(1,489
)
(12,350
)
Discontinued operations
(70
)
96
—
26
—
26
Net income (loss)
$
(4,473
)
$
(3,207
)
$
(3,155
)
$
(10,835
)
$
(1,489
)
$
(12,324
)
Weighted average shares outstanding
Income (loss) per share:
Continuing operations
$
Discontinued operations
Net Income (loss)
$
See accompanying notes.
F-5
BROOKDALE SENIOR LIVING INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
1.
Basis of Presentation
Brookdale Senior Living Inc. (the "Company") formed as
a Delaware corporation on June 28, 2005 to succeed to the
businesses of Brookdale Living Communities, Inc. and Alterra
Healthcare Corporation.
The accompanying unaudited pro forma condensed financial
information assumes that the offering and other formation
transactions described in the prospectus occurred on
March 31, 2005 for purposes of the unaudited pro forma
consolidated balance sheet and as of January 1, 2005 and
2004 for purposes of the unaudited pro forma consolidated
statements of operations.
These pro forma financial statements should be read in
conjunction with the historical financial statements and notes
thereto included elsewhere in this prospectus. In
management's opinion, all adjustments necessary to reflect
the offering and the formation transactions have been made.
The unaudited pro forma financial statements are not necessarily
indicative of the actual financial position as of March 31,
2005 or what the actual results of operations of the Company
would have been assuming the offering and formation transactions
had been completed as of January 1, 2004, nor are they
indicative of the results of operations of future periods.
2.
Adjustments to Pro Forma Condensed Consolidated Balance Sheet
    and Statement of Operations
(A) Reflects historical financial position of the Company
(formed June 28, 2005) and Brookdale/Alterra as of
March 31, 2005 and results of operations of
Brookdale/Alterra for the three months ended March 31, 2005
and for the year ended December 31, 2004.
(B)
Brookdale/Alterra Transaction Adjustments
Reflects the effect as if Brookdale/Alterra had consummated its
2004 leases and sale leasebacks and 2005 purchase of the four
development facilities as of the beginning of the year ended
December 31, 2004. See note 11 "Facility
Operating Leases" of Notes to Brookdale/Alterra —
Predecessor for Brookdale Senior Living Inc. beginning on page
F-47 of the Registration Statement. The adjustments relate
to adding the operations of the newly leased facilities as of
January 1, 2004 (resident fees, facility operating expenses
and facility lease expenses) and the elimination of ownership
costs (interest income, depreciation and amortization expense
and interest expense) and the addition of lease expense
(facility lease expenses) associated with the lease and
sale-leaseback facilities as of January 1, 2004. The
adjustment also includes the net effect the above adjustments
had on the overall Brookdale/Alterra income tax provision for
2004. As described in footnote 2 on page F-29 of the
Registration Statement, four facilities that were consolidated,
but not owned in 2004, were purchased in March 2005. Included in
the 2004 adjustment to the provision for income taxes is the net
effect as if they were owned as of January 1, 2004.
F-6
BROOKDALE SENIOR LIVING INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
(In thousands)
(C)
Initial Public Offering Adjustments
Balance Sheet
Following is a summary of adjustments to reflect the net
proceeds received from the offering and the use of proceeds:
Gross offering proceeds from sale
    of            common
    shares at $      per share
$
Less sale of 4.2 million
    common shares by minority stockholder
Less offering costs and
    underwriters' discount
Net proceeds from offering
Retirement of certain indebtedness
    and other:
i)  Retirement of
    mortgage and other debt
(62,144
)
ii)  Repayment of lessor
    advances(1)
(2,228
)
iii)  Purchase price of
    currently leased facilities, including fees and expenses
$
(20,700
)
Estimated
    debt financing to be obtained at closing
10,000
Release of
    cash and investments — restricted deposit
1,000
(9,700
)
Total use
    of proceeds
$
(74,072
)
Net excess
    cash from offering
$
(1)
The amount is classified into two accounts in the condensed
    consolidated balance sheet: Other Assets for $1,006 and Other
    Liabilities for $1,222.
In connection with our IPO,
    Brookdale/Alterra will be contributed to the Company. As such,
    the minority stockholders' ownership interest of Brookdale
    (50.4%) and Alterra (50.7%) will be adjusted as if their
    ownership interests were purchased by the Company. This
    adjustment reflects the step-up in the basis of assets and
    liabilities related to the minority shareholders of Brookdale
    and Alterra acquired (or exchanged) and have been adjusted to
    their fair values as of March 31, 2005
Property, plant and equipment:
$
31,702
Operating leases
67,179
Deferred costs
(2,648
)
Goodwill
(3,875
)
Mortgage debt
(162
)
Deferred gains
(58,882
)
Deferred lease liability
(7,026
)
Equity
158,428
Total step-up
$
184,716
F-7
BROOKDALE SENIOR LIVING INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
(In thousands)
Three Months
Year Ended
Ended
December 31, 2004
March 31, 2005
Statements of Operations
Facility lease expense:
Reflects net reduction in actual
    historical lease expense from IPO related transactions:
Purchase of leased facilities
$
(1,528
)
$
(436
)
Repayment of lessor advances
(351
)
(89
)
Adjustment for redesignation of
    interest rate swap to hedge floating rate lease payment
706
175
Adjustment for minority interest
    rate step-up
3,392
848
$
2,219
$
498
(C)
Initial Public Offering Adjustments (continued) —
    Statements of Operations:
Depreciation and amortization expense:
Depreciation and Amortization expense reflects depreciation and
amortization expense on purchased lease facilities with IPO
proceeds and the Brookdale/Alterra minority ownership interest
adjustment using the straight line method over our estimated
useful lives.
Amount
Minority
Three Months
Purchased
Shareholders
Year Ended
Ended
Leased
Interest
Estimated
December 31,
March 31,
Facilities
Adjustment
Total
Life
2004
2005
Land
$
1,976
$
2,838
$
4,814
N/A
$
—
$
—
Buildings and improvements
17,196
24,689
41,885
40 years
1,047
262
Furniture, fixtures and equipment
593
851
1,444
7 years
206
52
Lease intangibles(1)
935
3,324
4,259
1 year
4,259
1,065
Operating lease costs(2)
—
67,179
67,179
(2
)
3,271
817
Other
—
—
—
N/A
(666
)
(175
)
$
20,700
$
98,881
$
119,581
$
8,117
$
2,021
(1)
Reflects costs allocated to in-place tenant leases of each
    facility based upon a vacancy component. We typically do not pay
    commissions or provide incentives in leasing our units. The
    individual leases were considered at market due to their
    short-term nature (one year or less in duration).
(2)
Reflects costs allocated to the facilities we operate under
    long-term operating leases. Costs are amortized over the term of
    the lease.
F-8
BROOKDALE SENIOR LIVING INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
(In thousands)
Interest Expense:
Reflects a net reduction in interest expense (debt) from IPO
related transactions:
Three Months
Year Ended
Ended
Effective
December 31,
March 31,
Amount
Rate
2004
2005
Retirement of existing debt
$
62,144
7.53%
$
4,717
$
1,183
New debt related to purchase of
    leased facilities
$
10,000
6.12%
(612
)
(153
)
4,105
1,030
(D)
Acquisitions Adjustments
Reflects the actual purchase price, including closing costs, of
the Fortress CCRC Portfolio and Prudential Portfolio, that were
acquired in the second and third quarter 2005.
Fortress
CCRC
Prudential
Portfolio
Portfolio
Total
Assets:
Cash
$
2,898
$
—
$
2,898
Assets held for sale(1)
11,500
—
11,500
Other current assets
523
33
556
Total current assets
14,921
33
14,954
Property, plant and equipment
191,980
285,943
477,923
Cash and investments —
    restricted
6,428
2,237
8,665
Other assets
2,003
2,000
4,003
Total assets
$
215,332
$
290,213
$
505,545
Liabilities and shareholders'
    equity:
Obligations on assets held for sale
$
750
$
—
$
750
Accounts payable and other accrued
    expenses
3,309
909
4,218
Total current liabilities
4,059
909
4,968
Mortgage and other indebtedness
105,756
171,000
276,756
Refundable entrance fees
24,292
—
24,292
Total liabilities
134,107
171,909
306,016
Stockholders' equity
81,225
118,304
199,529
Total liabilities and
    shareholders' equity
$
215,332
$
290,213
$
505,545
(1)
Two of the Fortress CCRC Portfolio facilities (Heritage Crossing
    and Heatherwood Village) were marketed for sale. Heatherwood
    Village was sold on July 1, 2005 for $2.5 million and
    Heritage Crossing is under contract and scheduled to close in
    the third quarter of 2005.
F-9
BROOKDALE SENIOR LIVING INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands)
Fortress CCRC Portfolio
(D) Acquisitions Adjustments (continued)
Statements of Operations
Reflects the historical operations of the facilities that would
be consistent for our ownership for the year ended
December 31, 2004 and three months ended March 31,
2005:
CCRC Portfolio
Less
Facilities to
Prudential
Acquisition(1)
Be Sold(2)
Net
Portfolio
Total
Year ended December 31,
    2004:
Revenue:
Resident Fees
$
80,776
$
(11,384
)
$
69,392
$
47,367
$
116,759
Amortization of entrance fees
2,430
(477
)
1,953
—
1,953
Operating Expenses:
Facility operating
68,079
(11,108
)
56,971
26,537
83,508
Facility lease expense
—
—
—
1,008
1,008
Three months ended
    March 31, 2005:
Revenue:
Resident Fees
$
19,706
$
(2,754
)
$
16,952
$
12,200
$
29,152
Amortization of entrance fees
560
(96
)
464
—
464
Operating Expense:
Facility operating
16,574
(2,754
)
13,820
6,780
20,600
Facility lease expenses
—
—
—
252
252
(1)
Represents the historical operations at all eight Fortress CCRC
    Portfolio facilities for the periods presented.
(2)
Represents the historical operations of the two Fortress CCRC
    Portfolio facilities (Heritage Crossings and Heatherwood
    Village) that are classified as held for sale.
F-10
BROOKDALE SENIOR LIVING INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands)
(D) Acquisition Adjustments (continued)
Statements of Operations:
The following represents the additional costs of the
    Acquisition facilities under our ownership:
Three Months
Year Ended
Ended
December 31,
March 31,
2004
2005
Interest Expense:
Reflects interest expense for debt
    incurred in
connection with the acquisition of the properties:
Effective
Amount
Rate
Fortress CCRC Portfolio
$105.8 million
6.615%
(1)
$
(6,996
)
$
(1,749
)
Prudential Portfolio
$171.0 million
5.38%
(9,200
)
(2,300
)
$
(16,196
)
$
(4,049
)
(1)
Effective rate reflects interest rate under terms of a swap
    agreement.
General and Administrative Expense:
Reflects incremental general and
    administrative expenses for the Fortress CCRC Portfolio and
    Prudential Portfolio under our ownership and management.
    Expenses primarily consist of additional salaries and wages for
    new employees:
Fortress CCRC Portfolio
$
1,300
$
325
Prudential Portfolio
700
175
$
2,000
$
500
F-11
BROOKDALE SENIOR LIVING INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
(In thousands)
Depreciation and Amortization
    Expense:
Reflects depreciation and amortization expense on the
purchase of the Fortress CCRC Portfolio and Prudential
Portfolio, based on the purchase
price allocation as follows:
Three Months
Year Ended
Ended
Estimated
December 31,
March 31,
Amount
Life
2004
2005
Land
$
58.3 million
n/a
—
—
Building and improvements
$
391.3 million
40 years
9,783
2,446
Furniture, fixtures and equipment
$
10.3 million
7 years
1,484
372
Lease Intangible(1)
$
18.0 million
1 year
18,000
4,500
Amortization of deferred costs
803
200
$
30,070
$
7,518
(1)
Reflects costs allocated to in-place tenant leases at each of
    the acquired facilities based upon a vacancy component. We
    typically do not pay commissions or provide incentives in
    leasing our units. The individual leases were considered at
    market rate due to the short-term nature (one year or less in
    duration).
F-12
BROOKDALE SENIOR LIVING INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
(In thousands)
Other Adjustments:
Statement of Operations:
(E) Reflects net interest
    expense in connection with the refinancing of facilities that
    closed December 2004 and March 30, 2005, respectively, and
    interest rate swaps that closed March 2005:
Three
Months
Year Ended
Ended
Effective
December 31,
March 31,
Amount
Rate
2004
2005
New mortgage loans
$
182.0  million
8.15
%(1)
$
(14,823
)
$
(3,706
)
Mortgage loans repaid
$
178.8  million
9.61
%
17,189
4,370
Additional interest expense on
    refinancing and interest rate swap that closed December 2004 and
    March 2005, respectively
$
million
%(1)
(2,449
)
(553
)
$
(83
)
$
111
Loss on extinguishment of debt
    (write-off of unamortized deferred financing costs) related to
    the above refinancings
$
788
$
172
Net amortization of deferred
    costs related to the above refinancings
$
1,000
$
128
(1)
Reflects interest rate under terms of a swap agreement.
F-13
BROOKDALE SENIOR LIVING INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS — (Continued)
(In thousands)
(F) Reflects estimated
    synergies and operating expense reductions as a result of
    negotiated contracts with vendors such as food and insurance
$
(11,545
)
$
(2,886
)
(G) Reflects estimated
    synergies and general and administrative expense reductions
    offset by additional general and administrative expenses
    expected to be incurred to operate as a public company.
Estimated savings
$
(5,107
)
$
(1,277
)
Estimated additional costs as a
    public company
2,700
675
$
(2,407
)
(602
)
(H) Reflects compensation
    expense in connection with grants under the Restricted Stock
    Plan
$
10,114
$
2,528
(I) Reflects estimated
    management fees for managing one Fortress CCRC Portfolio
    facility (see note (L)) sold July 1, 2005 and now
    under a management agreement. Fee is based on 5% of gross
    revenues and entrance fee receipts.
$
250
$
63
(J) Reflects elimination of
    change in fair value of derivatives for forward interest rate
    swaps terminated and replaced by new interest rate swaps on
    March 30, 2005 (note (E))
$
(3,176
)
$
(4,062
)
(K) Reflects estimated
    additional interest income from cash and cash equivalents and
    cash and investments — restricted held in interest
    bearing accounts pursuant to the terms of the related agreement.
$
545
$
73
(L) The net effect of the
    acquisition, initial public offering and other pro forma
    adjustments results in additional losses for GAAP purposes. The
    net effect of these losses would result in no tax provision
    (benefit) as all losses would be included in the valuation
    allowance as we are in a net deferred tax asset position
    primarily due to loss carryforwards. We have applied a valuation
    allowance against the deferred tax assets.
Other Adjustments:
Balance Sheet:
(M) Reflects sale of one
    facility held for sale on July 1, 2005 for $2.5 million
(N) Reflects
    $20.0 million dividend paid to majority stockholder of
    Alterra
F-14
Schedule I
BROOKDALE SENIOR LIVING INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS,
GAAP EBITDA, ADJUSTED EBITDA AND CASH EARNINGS
Three Months Ended March 31, 2005
(Unaudited, in thousands)
Pro Forma
Adjusted
Brookdale/
Initial
Pro Forma
GAAP
Pro Forma
Adjusted
EBITDA
Alterra
Public
Other
As
EBITDA
GAAP
EBITDA
and Cash
Historical
Acquisitions
Offering
Adjustments
Adjusted
Adjustments
EBITDA
Adjustments
Earnings
Revenue:
Resident fees
$
174,112
$
29,152
$
—
$
—
$
203,264
$
—
$
203,264
$
—
$
203,264
Management fees
871
—
—
63
934
—
934
—
934
Amortization of entrance fees
—
464
—
—
464
(464
)
—
149
(B)
149
Total revenues
174,983
29,616
—
63
204,662
(464
)
204,198
149
204,347
Operating expenses:
Facility operating
110,328
20,600
—
(2,886
)
128,042
—
128,042
—
128,042
General and administrative
11,433
500
—
(602
)
11,331
—
11,331
—
11,331
Compensations Expense
—
—
—
2,528
2,528
(2,528
)
—
—
—
Facility lease expenses
46,502
252
498
—
47,252
—
47,252
(4,646
)(A)
42,606
Depreciation and amortization
5,596
7,518
2,021
128
15,263
(15,263
)
—
—
—
Total operating expenses
173,859
28,870
2,519
(832
)
204,416
17,791
186,625
(4,646
)
181,979
Subtotal:
$
1,124
$
746
$
(2,519
)
$
895
$
246
$
17,827
$
17,573
$
4,795
22,368
Adjustments:
Interest expense:
Debt
(9,531
)
Capitalized lease
    obligation
(1,983
)
Interest income
435
Recurring capital expenditures
(3,428
)
Cash Earnings
$
7,861
Notes
(A) To reflect adjustment for:
Straight-line rent expense
$
(6,094
)
Amortization of deferred gain
1,448
$
(4,646
)
(B) Entrance Fees:
Received
$
686
Disbursed
(537
)
$
149
(C) No adjustment for Federal
    or state income taxes required as we expect to be in an NOL
    position.
F-15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholder of
Brookdale Senior Living Inc.:
We have audited the accompanying balance sheet of Brookdale
Senior Living Inc. (the "Company") as of July 1,
2005. This balance sheet is the responsibility of the
Company's management. Our responsibility is to express an
opinion on the balance sheet based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of
material misstatement. We were not engaged to perform an audit
of the Company's internal control over financial reporting.
Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the balance sheet referred to above presents
fairly, in all material respects, the financial position of the
Company at July 1, 2005, in conformity with
U.S. generally accepted accounting principles.
/s/  Ernst & Young LLP
Chicago, Illinois
August 5, 2005
F-16
BROOKDALE SENIOR LIVING INC.
BALANCE SHEET
July 1, 2005
Cash
$
1,000
Commitments (note 2)
Stockholders' equity:
Preferred stock, $.01 par
    value, 5,000 shares authorized, no shares issued and
    outstanding
$
—
Common stock, $.01 par value,
    5,000 shares authorized, 1,000 shares issued and
    outstanding
10
Additional paid-in-capital
990
Total stockholders' equity
$
1,000
See accompanying notes to balance sheet.
F-17
BROOKDALE SENIOR LIVING INC.
NOTES TO BALANCE SHEET
July 1, 2005
1.
Organization
Brookdale Senior Living Inc. (the "Company") was
formed as a Delaware corporation on June 28, 2005. Under
the Certificate of Incorporation the Company is authorized to
issue up to 5,000 common shares and 5,000 of preferred shares.
The Company has had no operations since its formation.
2.
Formation of the Company/ Initial Public Offering
The Company is in the process of an initial public offering of
common shares although there can be no assurance that the public
offering will occur. The Company expects to operate senior
housing facilities through various subsidiaries that will be
included in the consolidated financial statements of the Company.
F-18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders of Brookdale Living Communities, Inc.
and Alterra Healthcare Corporation
We have audited the accompanying combined balance sheets of
Brookdale/ Alterra (the "Companies") as of
December 31, 2004 and 2003, and the related combined
statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended
December 31, 2004. Our audits also included the financial
statement schedule listed in the index. This financial statement
and schedule is the responsibility of the Companies'
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Companies' internal control over financial
reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companies' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
As discussed in Note 2 to the combined financial
statements, the Companies changed their method of accounting for
variable interest entities in 2003.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined financial
position of the Companies at December 31, 2004 and 2003,
and the combined results of their operations and their cash
flows for each of the three years in the period ended
December 31, 2004, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
/s/ Ernst & Young LLP
Chicago, Illinois
August 4, 2005
F-19
BROOKDALE/ ALTERRA
COMBINED BALANCE SHEETS
December 31, 2004 and 2003 and March 31, 2005
(In thousands, except per share data)
December 31,
March 31,
2005
2004
2003
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
76,083
$
86,858
$
56,468
Cash and investments —
    restricted
20,490
20,528
29,787
Accounts receivable, net
7,063
8,062
9,472
Deferred income tax
—
—
2,925
Assets held for sale
2,785
2,964
23,572
Prepaid expenses and other, net
13,690
16,891
18,554
Total current assets
120,111
135,303
140,778
Property, plant and equipment
558,073
557,293
1,434,789
Accumulated depreciation
(34,183
)
(33,674
)
(33,628
)
Property, plant and equipment, net
523,890
523,619
1,401,161
Cash and investments —
    restricted
22,419
27,459
24,975
Investment in unconsolidated
    ventures
14,713
14,805
19,484
Goodwill
8,961
8,961
44,650
Lease security deposit
26,478
26,233
6,824
Other, net
12,848
10,245
18,710
Total assets
$
729,420
$
746,625
$
1,656,582
Liabilities and
    Stockholders' Equity
Current liabilities:
Current portion of debt
$
4,606
$
3,888
$
113,315
Current portion of debt on assets
    held for sale
—
—
20,577
Unsecured line of credit
—
—
15,400
Trade accounts payable
6,889
7,437
6,588
Accrued expenses
68,764
77,333
73,146
Tenant refundable entrance fees and
    security deposits
15,015
14,756
11,793
Deferred revenue
14,238
14,588
15,191
Other
—
—
11,833
Total current liabilities
109,512
118,002
267,843
Long-term debt, less current portion
378,669
367,149
895,444
Deferred gains
136,107
138,402
9,886
Deferred lease liability
15,621
9,527
4,939
Deferred income taxes
—
—
51,365
Other
22,870
42,055
33,779
Total liabilities
662,779
675,135
1,263,256
Minority interests
36
36
193
Commitments and contingencies
Stockholders'
    Equity:
Common stock, $.01 par value,
    BLC 10 shares authorized; 1 share issued and
    outstanding, Alterra $.01 per value, 1,000 shares
    authorized, issued and outstanding, respectively
10
10
10
Additional paid-in-capital
92,021
92,021
391,811
Accumulated earnings (deficit)
(25,050
)
(20,577
)
1,312
Accumulated other comprehensive loss
(376
)
—
—
Total stockholders' equity
66,605
71,454
393,133
Total liabilities and
    stockholders' equity
$
729,420
$
746,625
$
1,656,582
See accompanying notes to combined financial statements.
F-20
BROOKDALE/ ALTERRA
COMBINED STATEMENTS OF OPERATIONS
Years Ended December 31, 2004, 2003 and 2002 and
Three Months Ended March 31, 2005 and 2004
(In thousands, except per share data)
Three Months
Years Ended
Ended March 31,
December 31,
2005
2004
2004
2003
2002
(Unaudited)
Revenue
Resident fees
$
174,112
$
154,583
$
657,327
$
217,216
$
156,894
Management fees
871
1,050
3,545
5,368
4,622
Total revenue
174,983
155,633
660,872
222,584
161,516
Expenses
Facility operating
110,328
99,810
415,169
133,119
92,980
General and administrative
11,433
10,239
43,640
15,997
12,540
Facility lease expense
46,502
17,825
99,997
30,744
31,003
Depreciation and amortization
5,596
14,597
52,307
22,480
13,708
Total operating expenses
173,859
142,471
611,113
202,340
150,231
Income from operations
1,124
13,162
49,759
20,244
11,285
Interest income
362
224
637
14,037
18,004
Interest expense:
Debt
(8,899
)
(18,167
)
(63,634
)
(25,106
)
(9,490
)
Change in fair value of derivatives
4,062
(2,832
)
3,176
—
—
Loss from sale of properties
—
—
—
(24,513
)
—
Gain (loss) on extinguishment
    of debt
(453
)
—
1,051
12,511
—
Equity in earnings (loss) of
    unconsolidated ventures, net of minority interest $(7), $(6),
    $(6), $11, and $—, respectively
(187
)
(373
)
(931
)
318
584
Other
(246
)
(974
)
(114
)
—
—
Income (loss) before income taxes
(4,237
)
(8,960
)
(10,056
)
(2,509
)
20,383
(Provision) benefit for income taxes
(166
)
713
(11,111
)
(139
)
(8,666
)
Income (loss) before discontinued
    operations and cumulative effect of a change in accounting
    principle
(4,403
)
(8,247
)
(21,167
)
(2,648
)
11,717
Loss on discontinued operations, net
(70
)
(820
)
(722
)
(643
)
—
Cumulative effect of a change in
    accounting principle, net of income taxes of $8,095
—
—
—
(13,208
)
—
Net income (loss)
$
(4,473
)
$
(9,067
)
$
(21,889
)
$
(16,499
)
$
11,717
Basic and diluted income (loss)
    per common share:
Income (loss) before discontinued
    operations and cumulative effect of a change of accounting
    principle
$
(4.40
)
$
(8.24
)
$
(21.15
)
$
(31.52
)
$
11,717.00
Discontinued operations
(0.07
)
(0.82
)
(0.72
)
(7.66
)
—
Cumulative effect of change in
    accounting principle
—
—
—
(157.24
)
—
Net income (loss)
$
(4.47
)
$
(9.06
)
$
(21.87
)
$
(196.42
)
$
11,717.00
Basic and diluted weighted average
    number of common shares outstanding
1,001
1,001
1,001
84
1
See accompanying notes to combined financial statements.
F-21
BROOKDALE/ ALTERRA
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2004, 2003 and 2002 and
Three Months Ended March 31, 2005
(In thousands)
Accumulated
Common Stock
Additional
Accumulated
Other
Total
Paid-In
Earnings
Comprehensive
Stockholders'
Shares
Amount
Capital
(Deficit)
(Loss)
Equity
Balances at
January 1, 2002
1
$
—
$
315,821
$
6,094
$
—
$
321,915
Net income
—
—
—
11,717
11,717
Balances at December 31,
    2002
1
—
315,821
17,811
—
333,632
Combination of Alterra
1,000
10
75,990
—
—
76,000
Net loss
—
—
—
(16,499
)
—
(16,499
)
Balances at December 31,
    2003
1,001
10
391,811
1,312
—
393,133
Dividends
—
—
(304,577
)
—
—
(304,577
)
Net loss
—
—
—
(21,889
)
—
(21,889
)
Tax effect of pre-fresh start
    accounting net operating loss carryforward
—
—
4,787
—
—
4,787
Balances at December 31,
    2004
1,001
10
92,021
(20,577
)
—
71,454
Net loss
—
—
—
(4,473
)
—
(4,473
)
Unrealized loss on derivative
—
—
—
—
(376
)
(376
)
Balances at
March 31, 2005
1,001
$
10
$
92,021
$
(25,050
)
$
(376
)
$
66,605
See accompanying notes to combined financial statements.
F-22
BROOKDALE/ ALTERRA
COMBINED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2004, 2003 and 2002 and
Three Months Ended March 31, 2005 and 2004
(In thousands)
Three Months
Years Ended
Ended March 31,
December 31,
2005
2004
2004
2003
2002
(Unaudited)
Cash Flows from Operating
    Activities
Net income (loss)
$
(4,473
)
$
(9,067
)
$
(21,889
)
$
(16,499
)
$
11,717
Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating activities:
Loss on sale of properties
—
—
—
24,513
—
Loss (gain) on extinguishment
    of debt
453
—
(1,051
)
(12,511
)
—
Cumulative effect of a change in
    accounting principle
—
—
—
13,208
—
Depreciation and amortization
5,596
14,597
52,307
22,480
13,708
Equity in (earnings) loss of
    unconsolidated ventures, net
187
373
931
(318
)
(584
)
Loss on discontinued operations
116
1,367
1,203
1,072
—
Amortization of deferred gain
(2,296
)
(135
)
(2,260
)
(539
)
(230
)
Deferred income taxes provision
    (benefit)
120
(1,260
)
10,630
(290
)
8,666
Change in deferred lease liability
6,094
(62
)
4,588
1,102
3,837
Change in fair value of derivatives
(4,062
)
2,832
(3,176
)
—
—
Long-term debt deferred interest
    and subsequent fee added to principal, net of $ —,
    $1,059, $2,342, $2,176 and $ — paid, respectively
—
117
1,380
798
1,088
Changes in operating assets and
    liabilities:
Accounts receivable, net
999
511
1,457
887
(396
)
Prepaid expenses and other assets,
    net
3,202
4,418
1,057
1,146
(2,461
)
Accounts payable and accrued
    expenses
(10,275
)
(7,108
)
3,865
(1,901
)
2,115
Tenant refundable entrance fees and
    security deposits
263
412
1,938
13
1,268
Other
(352
)
(1,434
)
(852
)
950
917
Net cash provided by (used in)
    operating activities
(4,428
)
5,561
50,128
34,111
39,645
Cash Flows from Investing
    Activities
Acquisition of leased facility
—
—
265
—
—
Increase in lease security deposits
    and lease acquisition deposits, net
(67
)
—
(70
)
(6,518
)
(7,730
)
Decrease in cash and
    investments — restricted
3,292
8,295
5,421
5,891
(6,185
)
F-23
BROOKDALE/ ALTERRA
COMBINED STATEMENTS OF CASH FLOWS — (Continued)
Years Ended December 31, 2004, 2003 and 2002 and
Three Months Ended March 31, 2005 and 2004
(In thousands)
Three Months
Years Ended
Ended March 31,
December 31,
2005
2004
2004
2003
2002
(Unaudited)
Increase in investment
    certificates — restricted
—
—
—
(5,004
)
(7,441
)
Net proceeds from sale of property,
    plant and equipment
677
11,532
24,023
80,622
—
Additions to property, plant and
    equipment, net of related payables
(5,660
)
(3,665
)
(37,951
)
(7,291
)
(3,554
)
Proceeds from sale leaseback, net
    of costs
—
—
520,043
—
—
Cash and cash equivalents from the
    combination of Alterra
—
—
—
57,972
—
Increase in reimbursable
    development costs
—
—
—
(11,139
)
(21,210
)
Purchase of venture partner's
    interest
—
—
—
(10,533
)
—
Distribution from unconsolidated
    venture
—
538
3,772
1,915
(1,150
)
Proceeds from sale of partnerships,
    net of minority interests
—
6,269
9,228
—
—
Net cash provided by (used in)
    investing activities
(1,758
)
22,969
524,731
105,915
(47,270
)
Cash Flows from Financing
    Activities
Proceeds from debt
192,000
340
79,809
29,161
8,370
Repayment of debt
(179,762
)
(47,379
)
(312,355
)
(111,220
)
(5,264
)
Payment of dividends
—
—
(304,577
)
—
—
Proceeds from unsecured lines of
    credit
—
31,400
94,200
96,500
92,398
Repayment of unsecured lines of
    credit
—
(29,300
)
(99,200
)
(109,702
)
(98,350
)
Proceeds from notes payable to
    affiliates
—
—
—
10,633
1,150
Payment of financing costs
(2,762
)
(788
)
(2,346
)
(1,102
)
(1,451
)
Payment of swap termination
(14,065
)
—
—
—
—
Proceeds from deferred gain
—
—
—
—
10,655
Advances from affiliate
—
—
—
—
1,222
Net cash provided by (used in)
    financing activities
(4,589
)
(45,727
)
(544,469
)
(85,730
)
8,730
Net increase (decrease) in cash and
    cash equivalents
(10,775
)
(17,197
)
30,390
54,296
1,105
Cash and cash equivalents at
    beginning of period
86,858
56,468
56,468
2,172
1,067
Cash and cash equivalents at end of
    period
$
76,083
$
39,271
$
86,858
$
56,468
$
2,172
See accompanying notes to combined financial statements.
F-24
BROOKDALE/ ALTERRA
COMBINED STATEMENTS OF CASH FLOWS — (Continued)
Years Ended December 31, 2004, 2003 and 2002 and
Three Months Ended March 31, 2005 and 2004
(In thousands)
Three Months
Years Ended
Ended March 31,
December 31,
2005
2004
2004
2003
2002
(Unaudited)
Supplemental Disclosure of Cash
    Flow Information:
Interest paid
$
10,410
$
18,051
$
61,844
$
25,656
$
8,183
Income taxes paid
$
1,872
$
58
$
836
$
149
$
109
Reorganization costs paid
$
—
$
—
$
—
$
10,846
$
—
Write-off of fully amortized
    intangible asset
$
4,404
$
—
$
—
$
—
$
—
Write-off of deferred costs
$
453
$
—
$
—
$
—
$
—
Supplemental Schedule of Noncash
    Operating, Investing and Financing Activities:
In connection with net operating
    lease transactions and property acquisitions assets acquired and
    liabilities assumed were as follows:
Property, plant and equipment
    excluding write-off of accumulated depreciation totaling $9,577
    in 2003
$
—
$
—
$
—
$
415,761
$
183,942
Cash and investments —
    restricted, current
—
440
1,300
14,023
—
Accounts receivable assumed
—
—
47
—
—
Prepaid expenses and other assumed
—
—
22
—
—
Other asset assumed
—
—
—
485
—
Lease security deposits redeemed
—
—
—
(156,787
)
(17,642
)
Deferred costs paid by lessor
—
—
112
—
—
Accrued real estate taxes assumed
—
—
(454
)
—
—
Trade accounts payable assumed
—
—
(117
)
—
—
Tenant refundable entrance fees and
    security deposits assumed
—
(440
)
(1,036
)
—
—
Other current liabilities assumed
—
—
(139
)
—
—
Debt assumed
—
—
—
(274,641
)
(119,855
)
Accrued interest assumed
—
—
—
(1,088
)
(974
)
Other liabilities, cancelled
—
—
—
2,247
—
Working capital, net acquired
—
—
—
—
704
Investment certificates —
    restricted cancelled
—
—
—
—
(32,459
)
Reimbursable development costs
—
—
—
—
(12,405
)
Net cash paid (received)
$
—
$
—
$
(265
)
$
—
$
1,311
F-25
BROOKDALE/ ALTERRA
COMBINED STATEMENTS OF CASH FLOWS — (Continued)
Years Ended December 31, 2004, 2003 and 2002 and
Three Months Ended March 31, 2005 and 2004
(In thousands)
Three Months
Years Ended
Ended March 31,
December 31,
2005
2004
2004
2003
2002
(Unaudited)
Consolidation of the development
    properties pursuant to FIN 46R (note 2):
Property, plant and equipment
$
—
$
—
$
—
$
300,405
$
—
Other assets assumed
—
—
—
8,789
—
Investment certificates —
    restricted
—
—
—
(58,484
)
—
Development fees receivable
—
—
—
(9,000
)
—
Reimbursable development costs
—
—
—
(42,584
)
—
Debt assumed
—
—
—
(191,543
)
—
Accrued interest assumed
—
—
—
(2,912
)
—
Accrued real estate taxes
—
—
—
(768
)
—
Security deposits assumed
—
—
—
(2,415
)
—
Other liabilities assumed
—
—
—
(1,488
)
—
Net cash paid
$
—
$
—
$
—
$
—
$
—
Investment in unconsolidated
    ventures, net purchase of venture partner's interest in
GFB-AS Investors, LLC
Other assets acquired
$
—
$
—
$
—
$
12,641
$
—
Investment in unconsolidated
    ventures
—
—
—
(1,926
)
—
Minority interests
—
—
—
(182
)
—
Net cash paid
$
—
$
—
$
—
$
10,533
$
—
Reclassification of property, plant
    and equipment to investment in unconsolidated ventures in
    connection with formation of Brookdale Senior Housing, LLC, net
$
—
$
—
$
—
$
15,229
$
—
See accompanying notes to combined financial statements.
F-26
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2004
(In thousands)
1.
Organization
These combined financial statements include the accounts of
Brookdale Living Communities, Inc, ("BLC") a
wholly-owned subsidiary of Fortress Brookdale Acquisition LLC,
("FBA") and effective December 1, 2003, Alterra
Healthcare Corporation ("Alterra" or "Successor
Alterra"), a wholly-owned subsidiary of FEBC ALT Investors,
LLC ("FEBC"). BLC and Alterra are controlled by
affiliates of the Fortress Investment Group ("FIG").
We operate within one business segment with activities related
to the ownership, development, and management of senior housing
facilities in the senior independent and assisted living
segment, and provides services to the elderly through facilities
located in urban and suburban areas of major metropolitan
markets in the United States.
BLC
BLC was incorporated in Delaware on September 4, 1996 and
commenced operations upon completion of its initial public
offering (the "IPO") which closed on May 7, 1997.
During the year ended December 2000 FBA acquired the outstanding
stock of BLC in an all cash transaction and Health Partners, a
Bermuda exempted partnership ("Health Partners")
agreed to contribute its convertible subordinated note
originally due 2009 in exchange for stock of FBA. FBA is owned
by Fortress Registered Investment Trust ("FRIT"),
Health Partners, Fortress Brookdale Investment Fund LLC,
and management. As of December 31, 2004, BLC owned or
leased 51 facilities and managed or served as management
consultant for 17 facilities for third party and affiliated
owners.
FBA sold 100% of the common stock of BLC to Provident Senior
Living Trust ("Provident") on October 19, 2004.
Prior to the sale, BLC distributed certain assets and
liabilities to a newly formed subsidiary. For financial
reporting purposes our operations include that of BLC prior to
and subsequent to the Provident transaction.
Alterra
Substantially all of the membership interests in FEBC are held
by Fortress Investment Trust I ("FRIT I"),
Emeritus Corporation ("Emeritus"), and NW Select, LLC.
Alterra owns and operates assisted living residences. As of
December 31, 2004, the Successor Alterra operated and
managed 300 residences located in 21 states throughout the
United States.
On November 26, 2003, a U.S. Bankruptcy Court entered
an order confirming Alterra's Second Amended Plan of
Reorganization. Alterra executed an Agreement and Plan of Merger
("Merger Agreement") with FEBC, pursuant to which FEBC
would acquire 100% of the common stock of the Company upon
emergence from the Chapter 11 bankruptcy proceeding.
Pursuant to the Merger Agreement, FEBC would pay Successor
Alterra $76.0 million of merger consideration, which may be
adjusted downward in certain circumstances. FEBC was capitalized
with $76.0 million including (i) a $15.0 million
senior loan to FEBC from an affiliate of Fortress Investment
Trust II LLC ("FRIT II"), a private equity
fund, and (ii) $61.0 million of aggregate equity
contributions. FRIT II provided approximately 75% of the
equity investment to FEBC and is entitled to appoint a majority
of the directors of Alterra. Emeritus Corporation and NW Select
LLC provided the remaining equity capital to FEBC and is
entitled to appoint one director.
Alterra emerged from bankruptcy on December 4, 2003 (the
Effective Date).
Settlement between Alterra and the committee of unsecured
creditors was finalized and approved by the Bankruptcy Court on
December 29, 2004, for a total fixed distributable amount
of $2.45 million. Payment of the settlement will be made
when all unsecured claims are determinable
F-27
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
and liquidated. This settlement was included in the fresh start
adjustments recognized in 2004 as an increase in current
liabilities and an increase in property, plant and equipment.
On the Effective Date, Alterra adopted fresh start accounting
pursuant to the guidance provided by the American Institute of
Certified Public Accountant's Statement of Position
(SOP) 90-7,
Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
. For financial
reporting purposes, Alterra adopted the provisions of fresh
start accounting effective December 1, 2003. In accordance
with the principles of fresh start accounting, Alterra has
adjusted its assets and liabilities to their fair values as of
December 1, 2003. Alterra's reorganization value was
determined to be equal to the cash amount paid for all of the
outstanding common stock of Alterra plus the post-emergence
liabilities existing at the reorganization date. To the extent
the fair value of its tangible and identifiable intangible
assets net of liabilities exceeded the reorganization value, the
excess was recorded as a reduction of the amounts allocated to
property and equipment and leasehold intangibles.
Alterra's condensed consolidated balance sheet reflecting
the application of fresh start accounting as of December 1,
2003 is summarized as follows ($ in 000's):
Assets
Current assets:
Cash and cash equivalents
$
57,972
Accounts receivable, net
8,014
Assets held for sale
52,537
Prepaid expenses and supply
    inventory
15,446
Other current assets
8,881
Total current assets
142,850
Property and equipment, net
392,298
Other assets
17,556
Total assets
$
552,704
Liabilities and
    Stockholders' Equity
Current liabilities:
Current installments of long-term
    obligations
$
68,951
Current debt maturities on assets
    held for sale
49,214
Accounts payable
4,880
Accrued expenses
74,777
Other liabilities
12,381
Total current liabilities
210,203
Long-term obligations, less current
    installments
264,256
Other long-term liabilities
2,245
Total liabilities
476,704
Stockholders' equity (deficit)
76,000
Total liabilities and
    stockholders' equity
$
552,704
F-28
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
2.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying combined financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States ("GAAP").
The accompanying unaudited combined financial statements as of
March 31, 2005 and for the three months ended
March 31, 2005 and 2004 have been prepared in accordance
with GAAP for interim financial information. Accordingly, they
do not include all of the information and notes required by GAAP
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
All amounts included in the notes to the combined financial
statements, referring to March 31, 2005 and 2004 are
unaudited. Operating results for the three month periods ending
March 31, 2005 are not necessarily indicative of the
results that maybe expected for the year ending
December 31, 2005.
Principles of Consolidation
The combined financial statements include the accounts of BLC
and Alterra (commencing December 1, 2003) and their
majority-owned subsidiaries. Results of operations of the
majority-owned subsidiaries are included from the date of
acquisition. All significant intercompany balances and
transactions have been eliminated.
In December 2003, the Financial Accounting Standards Board
("FASB") issued a revised Interpretation No. 46,
Consolidation of Variable Interest Entities
, an
interpretation of ARB No. 51 ("FIN 46R").
This Interpretation addresses the consolidation by business
enterprises of primary beneficiaries in variable interest
entities ("VIE") as defined in the Interpretation. A
company that holds variable interests in an entity will need to
consolidate the entity if its interest in the VIE is such that
it will absorb a majority of the VIE's losses and/or
receive a majority of expected residual returns, if they occur.
We developed and manage five facilities for third party entities
in which we have guaranteed certain debt obligations and have
the right to purchase or lease the facilities (as defined). We
evaluated our relationship with the entities pursuant to
FIN 46R and determined they are VIE's of which the
Company is the primary beneficiary. We elected to adopt
FIN 46R as of December 31, 2003 and accordingly,
consolidated the entities as of December 31, 2003 in the
accompanying financial statements. The consolidated assets and
liabilities of the entities primarily consist of property,
plant, equipment and related debt.
Facilities
Total Units
The Meadows of Glen Ellyn
234
The Heritage of Raleigh
219
The Hallmark, Battery Park City
217
Trillium Place
216
The Hallmark of Creve Coeur
218
1,104
On March 1, 2005, we obtained legal title to four of the
VIE's (The Meadows of Glen Ellyn, The Heritage of Raleigh,
Trillium Place and The Hallmark of Creve Coeur facilities). As
these four VIE's
F-29
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
were previously consolidated pursuant to FIN 46R, the legal
acquisition of the facilities had minimal accounting impact. At
March 31, 2005, The Hallmark, Battery Park City remains
consolidated pursuant to FIN 46R. Prior to consolidating
these facilities in our financial statements, we recorded
management fees of 5% - 7% of gross revenues in our combined
financial statements.
Investment in Unconsolidated Ventures
The equity method of accounting has been applied in the
accompanying financial statements with respect to our investment
in unconsolidated ventures that are not considered VIE's as
we do not possess a controlling financial interest (note 3).
New Accounting Pronouncements
In December 2004, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 123 (revised),
Share-Based Payment
, which addresses the accounting for
transactions in which an entity exchanges its equity instruments
for goods or services, with a primary focus on transactions in
which an entity obtains employee services in share-based payment
transactions. SFAS No. 123R is a revision to
SFAS No. 123 and supersedes Accounting Principles
Board (APB) Opinion No. 25,
Accounting for Stock
Issued to Employees
, and its related implementation
guidance. This Statement will require measurement of the cost of
employee services received in exchange for stock compensation
based on the grant-date fair value of the employee stock
options. Incremental compensation costs arising from subsequent
modifications of awards after the grant date must be recognized.
This Statement will be effective for us as of January 1,
2006. The impact of adoption of this Statement is not known at
this time.
Use of Estimates
The preparation of the combined financial statements in
accordance with GAAP requires management to make estimates and
assumptions that affect amounts reported and disclosures of
contingent assets and liabilities in the consolidated financial
statements and accompanying notes. Actual results could differ
from those estimates and assumptions.
Cash and Cash Equivalents
We consider all investments with an original maturity of three
months or less to be cash equivalents.
Accounts Receivable
Accounts receivable are reported net of an allowance for
doubtful accounts, to represent our estimate of the amount that
ultimately will be realized in cash. The allowance for doubtful
accounts was $2.7 and $2.9 million and $7.6 million as
of March 31, 2005 and December 31, 2004 and 2003,
respectively. The adequacy of our allowance for doubtful
accounts is reviewed on an ongoing basis, using historical
payment trends, write-off experience, analyses of receivable
portfolios by payor source and aging of receivables, as well as
a review of specific accounts, and adjustments are made to the
allowance as necessary.
F-30
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
Resident Fee Revenue
Resident fee revenue is recorded when services are rendered and
consists of fees for basic housing, support services and fees
associated with additional services such as personalized health
and assisted living care. Residency agreements are generally for
a term of one year or less.
Management Fee Revenue
Management fee revenue is recorded as services provided to the
owners of the facilities. Revenues are determined by an agreed
upon percentage of gross revenues (as defined).
Cash and Investments — Restricted
Cash and investments — restricted consist principally
of deposits required by certain lenders and lessors pursuant to
the applicable agreement and consist of the following as of
March 31 and December 31:
December 31
March 31,
2005
2004
2003
(Unaudited)
Current:
Real estate taxes
$
11,979
$
8,281
$
4,616
Tenant security deposits
4,951
5,089
17,611
Replacement reserve and other
3,560
3,139
7,560
Construction loan collateral
    (note 7)
—
4,019
—
Subtotal
20,490
20,528
29,787
Non-current:
Collateral deposit for interest
    rate swaps (note 8)
2,250
8,004
6,565
Insurance reserves
17,118
17,918
16,247
Debt service reserves
3,051
1,537
2,163
Subtotal
22,419
27,459
24,975
Total
$
42,909
$
47,987
$
54,762
Eight facilities located in Illinois are required to make escrow
deposits under the Illinois Life Care Facility Act. As of
December 31, 2004 and 2003, required deposits were $8,519
and $6,640, respectively, all of which were made in the form of
letters of credit.
Assets Held for Sale
We record an impairment loss on facilities held for sale
whenever their carrying value cannot be fully recovered through
the estimated cash flows, including net sale proceeds. The
amount of the impairment loss recognized is the difference
between the carrying value and the estimated fair value less
costs to sell. Our policy is to consider a facility to be held
for sale when we have committed to a plan to sell such facility
and active marketing activity has commenced or it is expected to
commence in the near term. Depreciation is suspended during the
period the assets are held for sale. Assets held for sale
principally comprises current assets and liabilities and net
property, plant and equipment. The corresponding mortgage
liability is recorded in current debt maturities on assets held
F-31
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
for sale. We expect to sell these facilities and land parcels
within twelve months of the date they are designated as held for
sale.
Income Taxes
Income taxes are accounted for under the asset and liability
approach which requires recognition of deferred tax assets and
liabilities for the differences between the financial reporting
and tax bases of assets and liabilities. A valuation allowance
reduces deferred tax assets when it is more likely than not that
some portion or all of the deferred tax assets will not be
realized.
Property, Plant and Equipment
Property, plant and equipment are carried at cost less
accumulated depreciation. Expenditures for ordinary maintenance
and repairs are expensed to operations as incurred. Renovations
and improvements, which improve and/or extend the useful life of
the asset are capitalized and depreciated over their estimated
useful life, or if the renovations or improvements are made with
respect to facilities subject to an operating lease, over the
shorter of the estimated useful life of the renovations or
improvements, or the term of the operating lease.
In accordance with SFAS No. 144
Accounting for the
Impairment or Disposal of Long-Lived Assets and Long-Lived
Assets to Be Disposed,
we will record impairment losses on
long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those
assets during the expected hold period are less than the
carrying amounts of those assets. Impairment losses will be
measured as the difference between carrying value and fair value
of assets.
We allocate the purchase price of facilities to net tangible and
identified intangible assets acquired based on their fair values
in accordance with the provisions SFAS No. 141
Business Combinations.
In making estimates of the fair
values of the tangible and intangible assets for purposes of
allocating purchase price, we consider information obtained
about each property as a result of its pre-acquisition due
diligence, marketing, leasing activities and independent
appraisals.
We allocate a portion of the purchase price to the value of
leases acquired based on the difference between the facilities
valued with existing in-place leases adjusted to market rental
rates and the property valued as if vacant. Factors management
considers in its analysis include an estimate of carrying costs
during the expected lease-up periods considering current market
conditions and costs to execute similar leases. In estimating
carrying costs, management includes estimates of lost rentals
during the lease-up period and estimated costs to execute
similar leases. The value of in-place leases is amortized to
expense over the remaining initial term of the respective leases.
Depreciation is provided on a straight-line basis over the
estimated useful lives of assets, which are as follows:
Asset Category
Estimated Useful Life
Buildings and improvements
40 years
Leasehold intangibles and
    improvements
1 - 18 years
Furniture and equipment
3 - 7 years
Resident lease intangibles
1 year
F-32
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
Deferred Costs
Deferred financing and lease costs are recorded at cost and
amortized on a straight-line basis, which approximates the level
yield method, over the term of the related debt or lease.
Earnings per Share
Basic and diluted earnings per share is computed by dividing net
income (loss) by the weighted average number of common shares
outstanding.
Fair Value of Financial Instruments
Cash and cash equivalents, cash and investments-restricted and
variable rate debt are reflected in the accompanying
consolidated balance sheets at amounts considered by management
to reasonably approximate fair value. Management estimates the
fair value of its long-term fixed rate debt using a discounted
cash flow analysis based upon our current borrowing rate for
debt with similar maturities. As of December 31, 2004 and
2003, the fair value of fixed rate debt approximates its book
value.
Derivative Financial Instruments
In the normal course of business, we use a variety of financial
instruments to manage or hedge interest rate risk. We have
entered into certain interest rate protection and swap
agreements to effectively cap or convert floating rate debt to a
fixed rate basis, fixed rate debt to a floating rate basis, as
well as to hedge anticipated future financing transactions. All
derivative instruments are recognized as either assets or
liabilities in the combined balance sheet at fair value. The
change in mark-to-market of the value of the derivative is
recorded as an adjustment to income or other comprehensive
income (loss) depending upon whether it has been designated and
qualifies as part of a hedging relationship.
We do not enter into derivative contracts for trading or
speculative purposes. Furthermore, we have a policy of only
entering into contracts with major financial institutions based
upon their credit rating and other factors.
We assumed certain interest rate protection and swap agreements
when we consolidated the VIE's as of December 31, 2003
to convert or cap floating rate debt to a fixed rate basis, as
well as to hedge anticipated future financing. In conjunction
with FIN 46R we recorded a cumulative effect of a change in
accounting principle resulting in a loss of $13,208, net of tax,
for the year ended December 31, 2003.
Goodwill
Goodwill relates to FBA's acquisition of BLC in 2000. This
cost is not amortized and we perform an annual impairment test
in accordance with SFAS No. 142,
Goodwill and Other
Intangible Assets
. We will record impairment losses on the
goodwill acquired when events and circumstances indicate that
the asset might be impaired. Impairment losses are measured as
the difference between carrying value and fair value of our net
assets.
We have one reporting unit which is the operation of senior
housing facilities. As more fully described in note 11, we
sold certain facilities to which we had allocated the goodwill
based upon the relative fair values at the point in time that
the original goodwill arose. Included in the deferred gain
calculation is the write-off of $35,689 of goodwill associated
with the facilities sold.
F-33
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
Self-Insurance Liability Accruals
We are subject to various legal proceedings and claims that
arise in the ordinary course of our business. Although we
maintain general liability and professional liability insurance
policies for our owned, leased and managed facilities under a
master insurance program, our current policy provides for
deductibles of $1.0 million for each and every claim. As a
result, we are self-insured for most typical claims. In
addition, we maintain a self-insured workers compensation
program (with excess loss coverage of $250,000 to
$500,000 per individual claim) and a self insured employee
medical program (with excess loss coverage of $200,000 to
$300,000 per claim). We are self-insured for amounts below
these excess loss coverage amounts. We review the adequacy of
our accruals related to these liabilities on an ongoing basis,
using historical claims, actual valuations, third party
administrator estimates, consultants, advice form legal counsel
and industry, and adjust accruals periodically. Estimated costs
related to these self-insurance programs are accrued based on
known claims and projected claims incurred but not yet reported.
Subsequent changes in actual experience are monitored and
estimates are updated as information is available.
Comprehensive Income
SFAS No. 130, "Reporting Comprehensive
Income," establishes guidelines for the reporting and
display of comprehensive income and its components in financial
statements. Comprehensive income includes net income and all
other non-owner changes in shareholders' equity during a
period including unrealized gains and losses on equity
securities classified as available-for-sale and unrealized fair
value adjustments on certain derivative instruments. Net income
(loss) equals comprehensive income (loss) for each of the three
years in the period ended December 31, 2004. Comprehensive
loss for the three months ended March 31, 2005 equals
$4,849.
Advertising Costs
Advertising costs are expensed as incurred and were $5,968,
$2,072, and $1,568, for the years ended December 31, 2004,
2003 and 2002, respectively and $1,429, and $1,377, for the
three months ended March 31, 2005 and 2004, respectively.
Facility Leases
We, as lessee, make a determination with respect to each of the
facility leases whether they should be accounted for as
operating leases or capital leases. We base our classification
criteria on estimates regarding the fair value of the leased
facility, minimum lease payments, our effective cost of funds,
the economic life of the facility and certain other terms in the
lease agreements. The initial lease terms vary from 15 to
20 years. Facilities under operating leases are accounted
for in our statement of operations as lease expense for actual
rent paid plus or minus a straight-line adjustment for estimated
minimum lease escalators and amortization of deferred gains in
situations where sale-leaseback transactions have occurred. For
facilities under capital lease and lease financing obligation
arrangements, a liability is established on our balance sheet
and a corresponding long-term asset is recorded. In addition, we
amortize leasehold improvements purchased during the term of the
lease over the shorter of their economic life or the lease term.
Sale lease back transactions are recorded as lease financing
obligations when the transactions include a form of continuing
involvement, such as purchase options.
All of our leases contain fixed or formula based rent
escalators. To the extent that the escalator increases are tied
to a fixed index or rate, lease payments are accounted for on a
straight-line basis
F-34
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
over the life of the lease. In addition, we recognize all
rent-free or rent holiday periods in operating leases on a
straight-line basis over the leased term, including the rent
holiday period.
A summary of facility lease expense and the impact of
straight-line adjustment amortization of deferred gains for the
three months ended March 31, and the years ended
December 31 are as follows:
March 31,
December 31,
2005
2004
2004
2003
2002
(Unaudited)
Cash basis payment
$
42,704
$
18,022
$
97,669
$
30,181
$
27,426
Straight-line expense (income)
6,094
(62
)
4,588
1,102
3,837
Amortization of deferred gain
(2,296
)
(135
)
(2,260
)
(539
)
(230
)
Facility lease expense
$
46,502
$
17,825
$
99,997
$
30,744
$
31,033
Sale Leaseback
Sale leaseback accounting is applied to transactions in which a
residence is sold and leased back from the buyer. Under sale
leaseback accounting, we remove the property and related
liabilities from the balance sheet. Gain on the sale is deferred
and recognized as a reduction of rent expense for operating
leases and a reduction of amortization expense for capital
leases.
Reclassifications
Certain prior period amounts have been reclassified to conform
to the current financial statement presentation, with no effect
on our consolidated financial position or results of operations.
3.
Investment in Unconsolidated Ventures
GFB-AS Investors, LLC
On January 30, 2001, BLC acquired a 45% interest in GFB-AS
Investors, LLC ("GFB"), a Delaware limited liability
company, and GFB, in turn, acquired management contract rights,
loans receivable, and the equity interests in the general
partners of various partnerships (the "GC Property
Partnerships") previously owned or controlled by affiliates
of Grand Court Lifestyles, Inc. Each GC Property Partnership
owns a senior housing facility (the "GC Facilities").
The total initial investment in GFB was $12,750, of which our
share was $5,738. On September 7, 2002, GFB purchased a
portion of the limited partners' interests in 15 of the GC
Property Partnerships. The members contributed an additional
$2,556 to fund these purchases of which the Company's share
was $1,150. Our investment in GFB was funded from the proceeds
of a loan made by its majority shareholder of FBA which bore
interest at 15% per annum. We accounted for GFB's
limited partner interests in the GC Property Partnerships under
the equity method of accounting.
On May 29, 2003, we purchased the remaining 55% interest in
GFB for $10,533, all of which was funded by additional loans
made by the shareholders of FBA. The existing loan to the
majority shareholder was amended and restated in connection with
the transaction and a restatement fee (as defined) of $857
incurred and included in interest expense in the accompanying
consolidated statement of operations. We incurred interest
totaling $— and $883 and $1,079, $3,418 and $1,102
F-35
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
on the shareholder loans for the three months ended
March 31, 2005 and 2004 and years ended December 31,
2004, 2003 and 2002, respectively.
For financial reporting purposes, the assets acquired and
liabilities assumed, as well as the results of operations of GFB
subsequent to May 29, 2003, are included in our combined
financial statements. We accounted for our investment in GFB
under the equity method prior to that date due to lack of
control. The portion of the purchase price allocated to
GFB's assets is included in other long-term assets in the
accompanying combined balance sheets.
As of December 31, 2004 and 2003, we have management
consulting and supervisory agreements with three and 19 GC
Property Facilities, respectively, providing for a fee payable
in the amount of 2.8% of the gross revenues. Fees from the GC
Facilities totaled $102 and $434 and $816, $2,363 and $2,317 for
the three months ended March 31, 2005 and 2004
(unaudited) and years ended December 31, 2004, 2003
and 2002, respectively.
During the quarter ended March 31, 2004, 14 GC Property
Partnerships in which GFB had general and limited partnership
interests, sold the facilities to Ventas, Inc. (note 9).
Upon the sale of the 14 GC Facilities and one additional GC
Facility, we received approximately $9,228 from our investment
in loans receivable and $3,989 from our general and limited
partnership interests. We did not recognize any gain or loss
related to these transactions.
Brookdale Senior Housing, LLC
On November 27, 2002, we purchased The Heritage at Gaines
Ranch, a 207-unit facility located in Austin, Texas
("Austin"), The Heritage of Southfield, a 217-unit
facility located in Southfield, Michigan
("Southfield"), and The Devonshire of Mt. Lebanon, a
218-unit facility located in Mt. Lebanon (Pittsburgh),
Pennsylvania ("Mt. Lebanon") which were developed and
managed for third party owners. The total purchase price
included cash of $41 plus the assumption of all liabilities,
including $76,132 of first mortgage loans and $13,391 of
mezzanine financing provided by a subordinate lender.
The three facilities were encumbered by first mortgage notes
payable totaling $76,132 originally due September 26, 2002
and March 11, 2003. The mortgage loans were
cross-collateralized and partially guaranteed by BLC. Upon the
non-payment of the mortgage loans due September 26, 2002,
the first mortgage lender declared an event of default and
accelerated the due date on the remaining loan.
We reached an agreement with the first mortgage lender on
August 8, 2003 to restructure the first mortgage loans
which gave us the right to payoff the first mortgage loans at an
agreed upon amount on or before December 31, 2003. For the
period November 1, 2002, through August 8, 2003 the
lender retained all rental receipts and we paid certain of the
facilities operating expenses. The agreement also provided,
among other things, for the first mortgage lender to forbear
with respect to the acceleration notices and interest to accrue
on the loan balances at the stated rate of LIBOR plus 3%. The
mezzanine loans related to the Austin and Southfield facilities
also matured on September 26, 2002 and we reached an
agreement with the subordinated lender to forbear on all claims
until February 1, 2004.
On September 30, 2003, we formed the Brookdale Senior
Housing, LLC joint venture ("Venture") with a third
party ("Venture Partner") and effectively sold 75% of
our interest in the Southfield and Mt. Lebanon facilities. The
Venture owns the Southfield and Mt. Lebanon facilities and
provided mezzanine financing for the Austin facility. The
Venture was capitalized with $66,328 of
F-36
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
cash of which $144 was contributed by us and the balance of
$66,184 from the Venture Partner in the form of $35,829 of
equity and $30,355 first mortgage financing. The first mortgage
loans are secured by the Southfield and Mt. Lebanon facilities
payable interest only at the rate of 6.75% through
September 30, 2008 and 7.25% through maturity on
October 1, 2009. The difference between the carrying amount
of this investment and the value of the underlying equity is
amortized as an adjustment to earnings from unconsolidated joint
ventures.
The Venture made a $12,739 mezzanine loan to the Austin facility
payable interest at the rate of all available cash flow, as
defined, and entitled the Venture to receive all appreciation in
the facility. In addition, the Venture Partner made a first
mortgage loan of $16,422 secured by the Austin facility and on
the same terms as the Southfield and Mt. Lebanon first mortgage
loans.
The Venture agreement provides that all operating cash flow is
distributed to the Venture Partner until they receive a 16%
cumulative preferred return and then 60% to the Venture Partner
and 40% to us. Sale or refinancing proceeds are to be
distributed first to the Venture Partner until they receive
their cumulative preferred return; second to the venture partner
until they receive the return of their contributed equity; and
then 60% to the Venture Partner and 40% to us. Additional
capital contributions, if any, are to be contributed 75% by the
Venture Partner and 25% by us.
In connection with the sale of its interest in the Southfield
and Mt. Lebanon facilities to the Venture, we received net
proceeds of $51,647, which resulted in a loss on the sale of
$24,513. The Company used the proceeds to repay the existing
first mortgage and mezzanine loans on the Southfield, Mt.
Lebanon and Austin facilities and recognized a gain on
extinguishment of debt of $12,511, net of closing costs.
We manage the facilities for a fee equal to 5% of gross
revenues. Under certain limited circumstances the venture
partner has the right to terminate the management agreement.
Combined summarized financial information of the unconsolidated
joint ventures accounted for using the equity method as of an
for the three months ended March 31 (unaudited) and
years ended December 31 are as follows:
March 31,
December 31,
2005
2004
2004
2003
2002
(Unaudited)
Statement of Operations
    Data:
Total revenue
$
2,781
$
2,558
$
10,701
$
3,977
$
2,977
Expenses:
Facility operating
2,200
2,106
8,208
2,047
431
Depreciation and amortization
405
601
2,216
690
1,035
Interest expense
505
509
2,049
522
213
Interest income
(551
)
(415
)
(1,602
)
(423
)
—
Other expense
—
—
35
168
—
Total expense
2,559
2,801
10,906
3,004
1,679
Net income (loss)
$
222
$
(243
)
$
(205
)
$
973
$
1,298
F-37
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
March 31,
December 31,
2005
2004
2004
2003
(Unaudited)
Balance Sheet Data:
Cash and cash equivalents
$
2,213
$
952
$
1,017
$
881
Notes receivable
12,739
12,891
12,739
12,739
Property, plant and equipment, net
50,397
52,292
50,777
52,853
Other
—
309
967
425
Total assets
$
65,349
$
66,444
$
65,500
$
66,898
Liabilities — accounts
    payable and accrued expenses
$
1,809
$
1,405
$
1,467
$
1,264
Long-term debt
30,355
30,355
30,355
30,355
Members' equity
33,185
34,684
33,678
35,279
Total liabilities and members'
    equity
$
65,349
$
66,444
$
65,500
$
66,898
Members' equity consists of:
Invested capital
$
35,973
$
35,973
$
35,973
$
35,973
Cumulative net loss
(17
)
(277
)
(239
)
(34
)
Cumulative distributions
(2,771
)
(1,012
)
(2,056
)
(660
)
Members' equity
$
33,185
$
34,684
$
33,678
$
35,279
4.
Property, Plant and Equipment
Property, plant and equipment consist of the following as of:
December 31,
March 31,
2005
2004
2003
(Unaudited)
Land
$
44,051
$
44,062
$
136,266
Buildings and improvements
467,172
463,490
1,232,117
Furniture and equipment
41,596
40,083
49,473
Resident and operating lease
    intangibles
5,254
9,658
16,933
558,073
557,293
1,434,789
Accumulated depreciation and
    amortization
(34,183
)
(33,674
)
(33,628
)
Property, plant and equipment, net
$
523,890
$
523,619
$
1,401,161
F-38
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
We exercised our option to purchase the following facilities
pursuant to the terms of the respective operating leases. In
general, the purchase price (before closing costs) was funded,
in part, by the assumption of a non-recourse first mortgage.
Concurrent with the purchase, the operating lease for each of
the facilities was terminated and the lease security deposit was
returned to us and simultaneously paid to the lessor as a
portion of the purchase price. A summary of purchases completed
during 2003 are as follows:
Purchase
Debt
Lease Security
2003 Facilities Purchased
Date
Price
Assumed
Deposit
The Gables at Farmington
April 22
$
18,128
$
12,525
$
5,603
The Kenwood of Lake View
April 22
21,807
14,225
7,582
The Atrium
April 22
45,022
30,000
15,022
Chatfield
July 1
18,232
11,368
6,864
Berkshire of Castleton
September  30
9,462
4,914
4,548
Brookdale Place of San Marcos
September  30
25,704
18,054
7,650
The Hallmark
September  30
96,324
62,388
33,936
The Springs of East Mesa
September  30
20,319
11,376
8,943
The Gables at Brighton
September  30
9,178
4,355
4,823
Park Place
September  30
16,561
9,765
6,796
Ponce de Leon
November 1
18,202
11,611
6,591
The Devonshire of Hoffman Estates
December 19
39,331
14,250
25,081
The Classic at West Palm Beach
December 31
26,794
18,948
7,846
Brendenwood
December 31
21,246
11,288
9,958
River Bay Club(1)
December 31
45,118
39,574
5,544
Total facilities purchased
$
431,428
$
274,641
$
156,787
(1)
River Bay Club debt assumed includes $13,222 of debt due
    February 2004 and secured by a restricted cash deposit of
    $14,023 at December 31, 2003. On February 2, 2004, the
    lease security deposit was returned to the Company and the
    corresponding debt was repaid.
5.
Assets Sold or Held for Sale
Nine facilities and five land parcels were designated as assets
held for sale effective December 1, 2003. In the period
from December 1, 2003 to December 31, 2003 nine
facilities were sold or disposed of and approximately
$28.6 million in debt was repaid or was assumed by the
buyer. In the year ending December 31, 2004, thirteen
facilities were sold or disposed, two land parcels were sold and
approximately $6.7 million in debt was repaid. As of
December 31, 2004, five facilities are held for sale. We
have presented separately as discontinued operations in all
periods, the results of operations for all consolidated assets
disposed of or held for sale through March 31, 2005.
F-39
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
The following table represents operating information included in
the loss on discontinued operations in the consolidated
statements of operations for the three months ended
March 31 and the years ended December 31 are as
follows:
March 31,
December 31,
2005
2004
2004
2003
(Unaudited)
Revenues
$
515
$
7,996
$
15,265
$
2,669
Operating expenses
717
8,300
16,533
3,059
Operating loss
(202
)
(304
)
(1,268
)
(390
)
Loss on debt extinguishment
—
—
—
(580
)
Gain (loss) on sale or disposal of
    residences
86
(1,063
)
65
(102
)
Benefit for income taxes
46
547
481
429
Loss on discontinued operations
$
(70
)
$
(820
)
$
(722
)
$
(643
)
There are a number of factors that may affect the timing of a
sale and the sale price that will ultimately be achieved for
these facilities, including, among other things, the following:
potential increased competition from any other facilities in the
area, the relative attractiveness of the facilities for
investment purposes, interest rates, the actual operations of
the residence, and the ability to retain existing residents and
attract new residents. As a result, there is no assurance as to
what price will ultimately be obtained upon a sale of these
facilities or the timing of such a sale. The estimated fair
value of the assets held for sale is reflected in current assets
and the outstanding debt related to the assets held for sale is
reflected in current liabilities on the consolidated balance
sheets.
6.
Other Assets
Other assets are comprised of deferred financing costs, net,
employee loan receivable (note 13), and other.
7.
Debt
Line of Credit Agreement
At March 31, 2005, and December 31, 2004 and 2003, we
had an available unsecured line of credit of $28,600 and $18,600
and $41,640 ($8,600, $8,600 and $7,524 is only available for
certain letters of credit), and $10,000, $0 and $15,400 were
outstanding, respectively. Borrowings under the line of credit
accrue interest at the prime rate plus 1.00% (prime rate 5.25%,
5.25% and 4.00% at March 31, 2005 and December 31,
2004 and 2003, respectively). We must pay a quarterly fee of
1/8% per annum on the unused amounts under the lines of
credit during the quarter. Pursuant to the terms of the credit
agreement, we must maintain certain debt service coverage
ratios. The line of credit matures on May 31, 2006.
As of March 31, 2005 and December 31, 2004 and 2003,
we have additional outstanding letters of credit totaling $3,292
with a second financial institution to secure the Company's
obligations for our self-insured retention risk under its
various insurance policies. The total amount of letters of
credit outstanding as of March 31, 2005 and
December 31, 2004 and 2003, of $19,230 and $15,749 and
$7,524 (stated above) includes $3,292 related to the
self-insured retention risk.
F-40
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
Long-term Debt, Capital Leases and Financing
Obligations
Long-term debt, capital leases and financing obligations consist
of the following as of March 31 and December 31:
December 31,
March 31,
2005
2004
2003
(Unaudited)
Mortgage notes payable due 2008
    through 2009 weighted average interest at rates of 6.42% in 2004
    (2003 weighted average interest rate 6.88%)
$
24,471
$
24,578
$
343,481
Mortgages payable, due from 2005
    through 2037; weighted average interest rate of 8.45% in 2004
    (2003 weighted average interest rate of 6.46%)
75,688
75,903
263,080
$150,000 Series A and $32,000
    Series B notes payable, secured by development
    properties, bearing interest at LIBOR plus 3.05% to LIBOR plus
    5.60%, respectively, payable in monthly installments of interest
    only, with a maturity date of April 1, 2008 and 50%
    guaranteed by the Company(a)
182,000
—
—
Construction and mezzanine loans
    payable secured by development properties consolidated pursuant
    to FIN 46R bearing interest at rates ranging from LIBOR
    plus 2.30% to LIBOR plus 3.50% (floor of 5.50%) and
    15.65%-19.50%, respectively, payable in monthly installments and
    $153,567 guaranteed by BLC(d)
—
179,248
191,542
Loan payable interest only monthly
    at prime plus 1% (prime 5.25% at March 31, 2005) and
    principal payable quarterly of $500 commencing July 1, 2005
    and maturing March 31, 2007
10,000
—
—
Capital and financing lease
    obligation payable through 2020; weighted average interest rate
    of 11.83% in 2004 (2003 weighted average interest rate of 11.48%)
66,284
66,284
76,967
Mezzanine loan payable to Brookdale
    Senior Housing, LLC joint venture with respect to The Heritage
    at Gaines Ranch facility, payable to the extent of all available
    cash flow (as defined)
12,739
12,739
12,739
Serial and term revenue bonds
    maturing serially from 2003 through 2013; interest rate of 7.36%
    in 2004 (2003 interest rate of 7.34%)
2,865
2,865
3,144
Notes payable to former joint
    venture partners through 2008; interest rates of 9.0%
9,228
9,420
10,048
Loan payable with respect to River
    Bay Club, payable quarterly interest only and repaid February
    2004 from cash and investments — restricted
—
—
13,222
F-41
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
December 31,
March 31,
2005
2004
2003
(Unaudited)
Variable rate tax-exempt and
    taxable bonds secured facilities, payable interest only (rates
    ranging from 1.12%-1.20% at December 31, 2003, until
    maturity on December 15, 2019-2029(b),(c)
—
—
94,290
Notes payable from shareholders of
    FBA bearing interest at 15% per annum plus contingent
    interest (as defined), secured by and repaid from proceeds from
    sale of investments by GFB-AS Investors, LLC
—
—
19,553
Promissory note payable to a bank
    bearing interest at 6.31% payable interest only and repaid
    January 2004
—
—
1,270
Total debt
383,275
371,037
1,029,336
Less current portion and debt on
    assets held for sale (2003)
4,606
3,888
133,892
Total long-term debt
$
378,669
$
367,149
$
895,444
(a)
Annually the Series A and B notes payable can be resized,
    as defined, to convert the Series B note to a Series A
    note. On the first anniversary date Series A interest rate
    is LIBOR plus 3.10% and Series B is LIBOR plus 6.60%
    increasing 1.00% annually thereafter. The notes can also be
    extended to two one-year terms based on meeting certain
    covenants.
(b)
The tax-exempt Qualified Residential Rental Bonds (the
    "Bonds") require a portion of the units at the
    facilities financed with the proceeds generated from the sale of
    the Bonds to be leased to qualified individuals based on income
    levels specified by the U.S. Government. The interest rate
    payable on the Bonds is adjusted weekly based upon the
    remarketing rate for the Bonds. The credit enhancement for the
    Bonds is provided by the Federal Home Loan Mortgage Corporation.
    The annual interest rate on the Bonds cannot exceed 15%. These
    obligations were assumed by Provident (note 11).
(c)
We guaranteed the reimbursement obligation to the credit
    enhancer on $65,000 of the tax-exempt debt, which guaranty is
    limited to $4,000 and terminates when the amount in the
    principal reserve fund equals or exceeds $4,000 (principal
    reserve fund balance of $2,635 at December 31, 2003,
    included in cash and investments — restricted in the
    accompanying consolidated balance sheet). These obligations were
    assumed by Provident (note 11).
(d)
Includes first mortgage and mezzanine loan payable to a
    shareholder of FBA with a balance, including accrued long-term
    interest, of $51,238 and $14,458, respectively, at
    December 31, 2004 originally due December 31, 2005.
    The first mortgage loan is guaranteed by BLC and bears interest
    at LIBOR plus 2.70% payable interest only monthly and net cash
    flow (as defined). The mezzanine loan accrues interest at 19.5%
    payable at maturity.
In connection with the Provident transaction the Company posted
    $4,000 in an interest bearing account as collateral for one
    construction loan maturing March 2005. Upon completion of the
    refinancing the collateral was released.
(e)
Certain of our debt agreements require us to maintain financial
    ratios, including debt service coverage and occupancy ratios and
    are guaranteed by us.
F-42
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
The annual aggregate scheduled maturities of long-term debt
obligations outstanding as of December 31, 2004 are as
follows:
Year Ending December 31,
Amount
2005
$
3,888
2006
3,320
2007
3,437
2008
193,087
2009
83,915
Thereafter
83,390
$
371,037
Substantially all the property, plant and equipment has been
pledged as collateral for the outstanding debt, capital lease
and financing obligations.
8.
Derivative Financial Instruments
We recorded the following interest rate swaps and
forward-starting interest rate swaps when we consolidated the
developmental facilities in accordance with FIN 46R on
December 31, 2003. Upon consolidation, we recorded a
cumulative effect of a change in accounting principle resulting
in a loss of $13,208, net of income taxes of $8,095, which was
the fair value of the swaps on the date of consolidation.
Interest Rate Swaps
We have one interest rate swap agreement that converts $37,320
of its floating-rate construction debt to a fixed-rate basis of
5.19% through maturity on April 1, 2005. The market value
of the swap at December 31, 2004 and 2003 was a liability
of $246 and $1,446, respectively, which is included in other
current liabilities.
Forward Interest Rate Swaps
The Company has four 10-year forward interest rate swaps to fix
$97,300 of future mortgage debt at 7.03%-7.325% with a maturity
date of August 2012 to March 2013. In May 2004, the Company
extended the termination dates to June 2006. The terms of the
forward interest rate swaps require the Company to pay a
fixed-interest rate to the counterparties and to receive a
variable rate from the counterparties. The fair value of the
forward interest rate swaps at December 31, 2004 and 2003
was a liability of $17,881 and $19,857, respectively. The
forward interest rate swaps are included in other long-term
liabilities at December 31, 2004, and other current
($10,387) and long-term liabilities ($9,470) at
December 31, 2003. Included in cash and
investments-restricted at December 31, 2004 and 2003 are
deposits of $8,004 and $6,565, respectively, to collateralize
our swap obligations.
For the year ended December 31, 2004, and the three months
ended March 31, 2005 and 2004 (unaudited), the fair value
of the interest rate and forward interest rate swaps liability
(increased) decreased by $3,176, $4,062 and ($2,832),
respectively, which is recorded as an adjustment to interest
expense in the accompanying consolidated statements of
operations.
F-43
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
On March 30, 2005, we terminated our existing forward
interest rate swaps and incurred a termination payment of
$15,807, including accrued interest of $1,742, which was funded
by a $10,000 unsecured loan bearing interest payable monthly at
prime plus 1% and principal payable in quarterly installments of
$500 commencing July 1, 2005 and maturing March 31,
2007.
In March 2005, we entered into interest rate swaps in the amount
of $252,000 to hedge the floating rate debt and lease payments
under which we pay an average fixed rate of 4.66% and receive
LIBOR from the counterparty. The interest rate swaps are
comprised of $215,000 seven-year swap at an average fixed rate
of 4.71% and $37,000 three-year swap at a fixed rate of 4.40% .
In connection with the swaps we posted $2,250 as collateral and
are required to post additional collateral based on changes in
the fair value of the swaps. The swaps are treated as cash flow
hedges with unrealized gains or losses recorded as accumulated
other comprehensive income. We are exposed to credit loss in the
event of non-performance by the counterparty to an interest rate
swap agreement, however; we do not anticipate non-performance by
the counterparty.
Interest Rate Caps
We had interest rate caps with a notional amount of $62,291 and
$15,040 and a strike price of 6.35% and 6.58% that expired at
June 1, 2009 and December 1, 2004. The interest rate
caps were assigned to Provident (see note 11).
9.
Accrued Expenses
Accrued expenses comprise of the following:
December 31,
March 31,
2005
2004
2003
(Unaudited)
Accrued salaries and wages
$
14,866
$
13,521
$
13,547
Accrued interest
1,431
3,622
6,649
Accrued insurance reserves
17,276
15,795
11,844
Accrued real estate taxes
9,599
11,877
11,235
Accrued income taxes
620
2,173
117
Accrued vacation
5,389
5,406
6,435
Accrued professional fees
2,433
2,936
10,675
Accrued lease payable
8,242
6,614
1,248
Other
8,908
15,389
11,396
Total
$
68,764
$
77,333
$
73,146
F-44
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
10.
Income Taxes
The (provision) benefit for income taxes is comprised of
the following as of March 31 and December 31:
Three Months
Ended
March 31,
December 31,
2005
2004
2004
2003
2002
(Unaudited)
Federal:
Current
$
—
$
—
$
(5,032
)
$
—
$
—
Deferred
—
1,223
(2,895
)
340
(6,904
)
—
1,223
(7,927
)
340
(6,904
)
State:
Current
(120
)
(3
)
(2,368
)
(127
)
(44
)
Deferred
—
40
(335
)
77
(1,718
)
(120
)
37
(2,703
)
(50
)
(1,762
)
Total
$
(120
)
$
1,260
$
(10,630
)
$
290
$
(8,666
)
A reconciliation of the (provision) benefit for income
taxes to the amount computed at the U.S. Federal statutory
rate of 34%:
Three Months
Ended March 31,
December 31,
2005
2004
2004
2003
2002
(Unaudited)
Tax (provision) benefit at
    U.S. statutory rate
$
1,494
$
3,528
$
3,721
$
1,241
$
(6,931
)
Variable interest entities
    (VIE's)
(1,337
)
(2,463
)
(10,342
)
—
—
State taxes, net of federal income
    tax
(113
)
187
(1,444
)
73
(1,163
)
Other, net
(164
)
8
(2,565
)
(1,024
)
(572
)
Total
$
(120
)
$
1,260
$
(10,630
)
$
290
$
(8,666
)
As discussed in note 2, we adopted FIN 46R as of
December 31, 2003 and consolidated the VIE's for
financial reporting purposes. For Federal and state income tax
purposes, we are not the legal owner of the entities and are not
entitled to receive tax benefits generated from the losses
associated with these VIE's. The Company did obtain legal
title to certain facilities on March 1, 2005.
F-45
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
Significant components of our deferred tax assets and
liabilities are as follows:
December 31,
March 31,
2005
2004
2003
(Unaudited)
Deferred income tax assets:
Operating loss carryforwards
$
38,085
$
34,106
$
80,301
Prepaid revenue
1,185
1,171
594
Accrued expenses
10,566
10,650
15,701
Property, plant and equipment
13,421
13,829
—
Fair value of swaps (a cumulative
    effect of a change in accounting principal in 2003, note 8)
2,428
6,833
8,095
Deferred gain on sale leaseback
39,945
41,186
—
Other
5,077
2,332
716
Total gross deferred income tax
    asset
110,707
110,107
105,407
Valuation allowance
(88,917
)
(89,282
)
(46,276
)
Net deferred income tax assets
21,790
20,825
59,131
Deferred income tax liabilities:
Property, plant and equipment
(13,399
)
(12,352
)
(99,873
)
Investment in Brookdale Senior
    Housing, LLC
(5,345
)
(5,402
)
(5,802
)
Other
(3,046
)
(3,071
)
(1,896
)
Total gross deferred income tax
    liability
(21,790
)
(20,825
)
(107,571
)
Net deferred income tax liability
$
—
$
—
$
(48,440
)
As described in note 11, in 2004 we sold the stock of BLC
to Provident who assumed BLC's income tax positions
resulting in a non-taxable gain for income tax purposes. For
financial reporting purposes we recorded a deferred tax asset of
$41,186 from the gain. Included in the deferred gain on sale
leaseback is a net deferred tax liability of $51,669 assumed by
Provident comprised primarily of deferred tax liabilities
related to the stock sale, net of operating loss carryforwards
and related valuation allowance.
At December 31, 2004, BLC has net operating loss
carryforwards for Federal and state income tax purposes of
approximately $13,611 and $19,331, respectively, which are
available to offset future taxable income, if any, through 2024.
We have recorded a valuation allowance due to uncertainties
regarding our ability to utilize these losses in the future.
In connection with fresh start accounting Alterra's assets
and liabilities were recorded at their respective fair market
values. Deferred tax assets and liabilities were recognized for
the tax effects of the difference between the fair values and
the tax bases of Alterra's assets and liabilities. In
addition, deferred tax assets were recognized for the future use
of net operating losses. The valuation allowance established to
reduce deferred tax assets as of December 31, 2004 and 2003
was $28.4 million and $32.7 million, respectively. The
reduction in this valuation allowance relating to net deferred
tax items existing at the Effective Date will increase
additional paid in capital. At December 31, 2004, Alterra
increased additional paid-in capital by $4.8 million as a
result of a reduction in valuation allowance related to net
deferred tax assets not benefited under fresh-start accounting,
but realized in the year ended December 31, 2004.
F-46
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
The reorganization of Alterra constituted an ownership change
under section 382 of the Internal Revenue Code. The use of
any of its net operating losses generated prior to the ownership
change that are not reduced pursuant to the provisions discussed
above will be subject to an overall annual limitation of
approximately $3.6 million. Further utilization of net
operating losses can be achieved by increasing the net operating
loss limitation (under section 382) for recognized built-in
gains. During 2004, Alterra increased the section 382
limitation by $63.3 million as a result of recognizing
built-in gains. Alterra has provided a valuation allowance for
the entire amount of the net operating loss remaining after the
reduction above, as well as its other net deferred tax assets.
Alterra has approximately $67.6 million of net operating
losses subject to the section 382 limitation and
$6.2 million of regular net operating loss carryforwards at
December 31, 2004. Any unused net operating loss
carryforwards will expire commencing in years 2021 through 2023.
A reconciliation to the combined balance sheet is as follows:
December 31,
March 31,
2005
2004
2003
(Unaudited)
Deferred income tax liability
$
—
$
—
$
(51,365
)
Current deferred income tax asset
—
—
2,925
Net deferred income tax liability
$
—
$
—
$
(48,440
)
11.
Facility Operating Leases
We have entered into sale leaseback and lease agreements with
certain real estate investment trusts (REITs). Under these
agreements we either sell facilities to the REIT or enter into a
long-term lease agreement for such facilities. The lease terms
vary from 10 to 20 years and include renewal options
ranging from 5 to 30 years. We are responsible for all
operating costs, including repairs, property taxes and
insurance. The substantial majority of our lease arrangements
are structured as master leases. Under a master lease, we lease
numerous facilities through an indivisible lease. We typically
guarantee our performance and the lease payments under the
master lease and are subject to net worth, minimum capital
expenditure requirements per facility per annum and minimum
lease coverage ratios. Failure to comply with these covenants
could result in an event of default.
Ventas Portfolio
During the first quarter of 2004, the limited partnerships that
owned 14 GC Facilities (1,994 units), in which GFB had
general and limited partnership interests, sold the facilities
to Ventas, Inc. ("Ventas") and we entered into an
operating lease agreement to lease the facilities from Ventas
for an initial aggregate annual lease rate of $10,598 (the
"Ventas Lease"). The Ventas Lease has an initial term
of 15 years with our right to extend for up to two 10-year
periods and is guaranteed by BLC. We also have the right to
purchase the facilities in year 15 at the greater of the fair
market value or a stated minimum purchase price.
On May 13, 2004, we amended the operating lease agreement
with Ventas to include a 221-unit facility with an initial
annual lease rate of $3,549 except we do not have a purchase
option.
On October 19, 2004, the Ventas Lease was amended to
provide for: (i) annual escalations of the greater of 2.0%
(increased from 1.5%) or 75% of the CPI increase,
(ii) purchase option in year
F-47
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
15 (from year 10) of the lease and (iii) a security
deposit of $7,230 (increased from $1,205) which is in the form
of letters of credit.
Provident Portfolio
On June 18, 2004, FBA entered an agreement to sell the
stock of BLC to Provident Senior Living Trust
("Provident"). The sale was contingent upon BLC
obtaining certain third party consents, which were obtained
prior to the closing of the sale on October 19, 2004. Prior
to the sale, BLC distributed all the assets and liabilities,
except for the real estate of 21 owned facilities
(4,474 units) and related property debt, certain other
mezzanine loans and the unsecured line of credit, to a new
entity representing the continuing BLC entity. In connection
with the stock sale, Provident assumed BLC's income tax
positions.
In October and December 2004, Alterra sold 38 (1,732 beds)
and nine facilities (613 beds), respectively to Provident.
The aggregate sales price was $982,798 including transaction
costs, assumed debt and other liabilities. Simultaneously with
the closing, we entered into an operating lease agreements to
lease back the facilities, resulting in the gain on the sale of
$130,776 being deferred and amortized over the initial lease
term. In addition, we recognized a gain of $1,051 on the
assumption of the mezzanine loans. A summary of the deferred
gain is as follows:
Sales price
$
982,798
Net carrying value
(856,339
)
Transaction costs
(11,663
)
Goodwill write-off
(35,689
)
Net deferred tax liability assumed
    by Provident (note 10)
51,669
Deferred gain
$
130,776
Proceeds from the sale were
    distributed as follows:
Sales price
$
982,798
Assumption of debt and accrued
    interest
(461,248
)
Assumption of mezzanine loans and
    unsecured line of credit
(114,202
)
Transaction costs, net
(10,494
)
Lease security deposit
(20,000
)
Dividend to shareholders
(254,577
)
Net working capital retained
$
122,277
BLC's operating lease has an initial term ending on
December 31, 2019, with our right to extend for up to two
10-year periods and is guaranteed by BLC. The initial annual
lease rate is approximately $60,130 and can be adjusted for
changes in interest rates on $110,771 of variable rate mortgages
assumed by the lessor and increases annually starting on
January 1, 2006 by the lesser of 3% or four times the
percentage increase in CPI.
Alterra's operating lease has an initial term ending on
October 31, 2019 with our right to extend for two five-year
periods and is guaranteed by Alterra. The initial annual lease
is $23,143 and increases annually by the lesser of 2.5% or four
times the percentage increase in CPI.
In connection with the transaction, FBA made a $20,000 lease
security deposit in an interest bearing account at the time of
closing and Alterra has agreed to deposit 50% of excess cash flow
F-48
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
until the security deposit is $10,000. We agreed to spend a
minimum of $400 to $450 per unit per year on capital
improvements on the BLC facilities of which Provident will
reduce BLC's security deposit by that same amount up to
$600 per unit per year.
12.
Commitments and Contingencies
We have two operating lease agreements for 30,314 and
44,222 square feet of office space that extends through
2010 and 2009, respectively. The leases require the payment of
base rent which escalates annually, plus operating expenses (as
defined). We incurred rent expense of $2,449, $1,213 and $1,103
for the years ended December 31, 2004, 2003 and 2002,
respectively, and $370 and $603 for the three months ended
March 31, 2005 and 2004, respectively, under the office
leases which are included in general and administrative expense
in the accompanying combined statements of operations.
The aggregate amounts of all future minimum operating lease
payments, including facilities and office leases, as of
December 31, 2004, are as follows:
Capital/
Financing
Operating
Year Ending December 31,
Leases
Leases
Total
2005
$
7,944
$
169,255
$
177,199
2006
7,944
173,952
181,896
2007
7,944
178,088
186,032
2008
7,944
180,703
188,647
2009
7,944
183,763
191,707
Thereafter
67,894
2,018,523
2,086,417
Total minimum lease payments
107,614
2,904,284
3,011,898
Less amount representing interest
    (11.83%)
(41,331
)
—
(41,331
)
$
66,283
$
2,904,284
$
2,970,567
Litigation
We are involved in various lawsuits and are subject to various
claims arising in the normal course of business. In the opinion
of management, although the outcomes of these suits and claims
are uncertain, in the aggregate, they should not have a material
adverse effect on our business, financial condition and results
of operations.
13.
Insurance, Benefits and Employee Loan
Insurance
We obtain various insurance coverages from commercial carriers
at stated amounts as defined in the applicable policy. Losses
related to deductible amounts are accrued based on the
Company's estimate of expected losses plus incurred but not
reported claims. As of March 31, 2005 and December 31,
2004 and 2003, we have accrued $35,081 and $35,355 and $32,091,
respectively, for our self-insured programs.
We have secured our self-insured retention risk under our
workers' compensation and general liability and
professional liability programs with cash and letters of credit
aggregating $17,118 and
F-49
BROOKDALE/ ALTERRA
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
December 31, 2004
(In thousands)
$3,292 and $17,918, $16,247 and $3,292 as of March 31, 2005
and 2004 and December 31, 2004, 2003 and 2002, respectively.
Employee Benefit Plan
We maintain a 401(k) Retirement Savings Plan for all employees
that meet minimum employment criteria. The plan provides that
the participants may defer eligible compensation on a pre-tax
basis subject to certain Internal Revenue Service maximum
amounts. We make matching contributions in amounts equal to 25%
of the employee's contribution to the plan. Employees are
always 100% vested in their own contributions and vest in our
contributions over five years. We made contributions to such
plans in the amount of $879, $472 and $323 for the years ended
December 31, 2004, 2003 and 2002, respectively, and $107
and $94 for the three months ended March 31, 2005 and 2004,
respectively. Such amounts are included in facility operating
and general and administrative expense in the accompanying
combined statements of operations.
Employee Loan
In October 2000, pursuant to the terms of his employment
agreement, BLC loaned approximately $2.0 million to our
Chief Executive Officer. In exchange, BLC received a ten-year,
secured, non-recourse promissory note, which note bears interest
at a rate of 6.09% per annum, of which 2.0% is payable in
cash and of which the remainder accrues and is due at maturity
on October 2, 2010. The note is secured by the Chief
Executive Officer's membership interests in FBA.
14.
Subsequent Events
On April 6 and 14, 2005, we entered into agreements with
affiliates of FIG to manage eight continuing care retirement
communities for a fee of 4-6% of gross revenues and 3% of net
entrance fees. Two facilities are held for sale, one of which
was sold July 1, 2005. We were retained as the facility
manager.
On June 21, 2005 and July 22, 2005, we entered into
agreements with affiliates of FIG to manage nine facilities for
a fee of 4-6% of gross revenues (unaudited).
F-50
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
December 31, 2004
(In thousands)
Additions
Balance at
Charged to
Charged
Balance at
Beginning of
costs and
to other
Combination
End of
Description
Period
expenses
accounts
of Alterra
Deductions
Period
Allowance for Doubtful Accounts
Year ended December 31, 2002
$
317
$
344
$
—
$
—
$
361
$
300
Year ended December 31, 2003
$
300
$
560
$
—
$
7,374
$
588
$
7,646
Year ended December 31, 2004
$
7,646
$
831
$
—
$
—
$
5,614
$
2,863
Deferred Tax Valuation Account
Year ended December 31, 2002
$
13,573
$
—
$
—
$
—
$
—
$
13,573
Year ended December 31, 2003
$
13,573
$
—
$
—
$
32,703
$
—
$
46,276
Year ended December 31, 2004
$
46,276
$
—
$
43,006
$
—
$
—
$
89,282
See accompanying report of independent registered public
accounting firm.
F-51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholder of Brookdale Living Communities, Inc.
We have audited the accompanying combined statements of
financial position of the properties comprising the Fortress
CCRC Portfolio (the "Properties") as of
December 31, 2004 and 2003, and the related combined
statements of activities and changes in net deficit, and cash
flows for each of the three years in the period ended
December 31, 2004. These financial statements are the
responsibility of the Properties' management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Properties' internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Properties' internal control over financial reporting.
Accordingly we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined financial
position of the Properties at December 31, 2004 and 2003,
and the combined results of their operations and their cash
flows for each of the three years in the period ended
December 31, 2004, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
July 22, 2005
F-52
FORTRESS CCRC PORTFOLIO
COMBINED STATEMENTS OF FINANCIAL POSITION
(In thousands)
December 31,
March 31
2005
2004
2003
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
3,213
$
3,873
$
1,962
Accounts receivable
4,570
4,254
3,448
Marketable securities
7,024
16,309
18,816
Prepaid expenses and other
434
651
455
Total current assets
15,241
25,087
24,681
Property and equipment
225,814
225,143
230,855
Accumulated depreciation
(75,995
)
(74,065
)
(66,586
)
Property and equipment, net
149,819
151,078
164,269
Bond proceeds held by trustee
7,276
7,673
12,685
Long-term investments
2,499
2,499
2,151
Goodwill, net
2,341
2,363
2,451
Deferred financing costs, net
3,706
3,778
4,068
Other
530
539
572
Total assets
$
181,412
$
193,017
$
210,877
Liabilities and Net Asset
    (Deficit)
Current liabilities:
Bonds payable
$
183,079
$
183,053
$
182,946
Accrued interest payable
5,611
4,624
2,538
Trade accounts payable and accrued
    expenses
5,298
4,391
3,737
Due to parent, net
43,863
8,302
12,039
Total current liabilities
237,851
200,370
201,260
Unearned entrance fees
29,786
30,197
35,013
Other
1,758
1,759
1,639
Total liabilities
269,395
232,326
237,912
Net asset (deficit)
Unrestricted
(91,217
)
(42,573
)
(30,008
)
Temporarily restricted
736
766
823
Permanently restricted
2,498
2,498
2,150
Total net deficit
(87,983
)
(39,309
)
(27,035
)
Total liabilities and net asset
    (deficit)
$
181,412
$
193,017
$
210,877
See accompanying notes to the combined financial statements.
F-53
FORTRESS CCRC PORTFOLIO
COMBINED STATEMENTS OF ACTIVITIES AND CHANGES IN NET
DEFICIT
(In thousands)
Three Months
Ended March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
(Unaudited)
Revenue
Resident fees
$
19,706
$
19,992
$
80,776
$
75,856
$
71,467
Amortization of entrance fees
560
612
2,430
2,841
3,093
Total revenue
20,266
20,604
83,206
78,697
74,560
Expenses
Facility operating
16,574
16,562
68,079
64,746
63,051
Management fees —
    affiliate
868
842
3,467
3,320
3,187
Depreciation and amortization
1,990
1,959
7,885
7,753
7,550
Impairment of property and equipment
—
—
9,063
—
—
Total operating expenses
19,432
19,363
88,494
75,819
73,788
Income (loss) from operations
834
1,241
(5,288
)
2,878
772
Other income (expense):
Contributions and deferred gifts
71
604
3,389
2,736
3,383
Interest income
455
266
1,590
1,503
1,619
Net unrealized and realized gains
    (losses) on investments
(158
)
150
75
(457
)
(2,643
)
Gain on sale of equipment
—
—
—
341
90
Interest expense
(1,013
)
(1,508
)
(5,329
)
(11,410
)
(10,993
)
Interest expense —
    affiliate
(675
)
(447
)
(2,090
)
(1,252
)
(821
)
Amortization of deferred financing
    costs
(72
)
(73
)
(290
)
(298
)
(293
)
Change in net assets from operations
(558
)
233
(7,943
)
(5,959
)
(8,886
)
Net transfers (to) from NBA
(48,116
)
(797
)
(4,331
)
(1,590
)
(305
)
Change in net deficit
(48,674
)
(564
)
(12,274
)
(7,549
)
(9,191
)
Net deficit at beginning of period
(39,309
)
(27,035
)
(27,035
)
(19,486
)
(10,295
)
Net deficit at end of period
$
(87,983
)
$
(27,599
)
$
(39,309
)
$
(27,035
)
$
(19,486
)
See accompanying notes to the combined financial statements.
F-54
FORTRESS CCRC PORTFOLIO
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months
Ended March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
(Unaudited)
Operating activities
Change in net assets from operations
$
(558
)
$
233
$
(7,943
)
$
(5,959
)
$
(8,886
)
Adjustments to reconcile change in
    net assets from operations to net cash provided by (used in)
    operating activities:
Amortization of entrance fees
(560
)
(612
)
(2,430
)
(2,841
)
(3,093
)
Depreciation and amortization
1,990
1,959
7,885
7,753
7,550
Impairment of property and equipment
—
—
9,063
—
—
Net (gain) loss on investment
    activity
158
(150
)
(75
)
457
2,643
Amortization of deferred financing
    costs
72
73
290
298
293
Amortization of debt discounts
26
27
107
110
105
Gain on sale of property and
    equipment
—
—
—
(341
)
(90
)
Changes in operating assets and
    liabilities:
Accounts receivable
(316
)
(362
)
(806
)
(638
)
(86
)
Prepaid expenses and other assets
217
(1,810
)
(196
)
332
201
Other assets
9
14
33
(31
)
58
Accrued interest payable
987
770
2,086
171
(63
)
Accounts payable and accrued
    expenses
907
2,004
654
(3,315
)
1,496
Other liabilities
(1
)
121
120
601
(161
)
Net cash provided by (used in)
    operating activities
2,931
2,267
8,788
(3,403
)
(33
)
Investing activities
Net change in bond proceeds held by
    trustee
397
1,054
5,012
1,840
(575
)
Net proceeds from sale (purchase
    of) marketable securities
9,127
3,926
2,234
10,008
(6,859
)
Additions to property and equipment
(709
)
(552
)
(3,669
)
(3,540
)
(3,816
)
Proceeds from sale of property and
    equipment
—
—
—
362
123
Net cash provided by (used in)
    investing activities
8,815
4,428
3,577
8,670
(11,127
)
Financing activities
Repayment of bonds payable
—
—
—
(2,844
)
(3,682
)
Net transfers to NBA
(48,116
)
(797
)
(4,331
)
(1,590
)
(305
)
Net advances from (to) parent
35,561
(2,613
)
(3,737
)
(1,838
)
10,964
Payment of financing costs
—
—
—
—
(100
)
Net additions to (refunds of)
    entrance fees
149
(3,381
)
(2,386
)
738
4,585
Net cash provided by (used in)
    financing activities
(12,406
)
(6,791
)
(10,454
)
(5,534
)
11,462
F-55
FORTRESS CCRC PORTFOLIO
COMBINED STATEMENTS OF CASH
FLOWS — (Continued)
(In thousands)
Three Months
Ended March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
(Unaudited)
Net increase (decrease) in cash and
    cash equivalents
(660
)
(96
)
1,911
(267
)
302
Cash and cash equivalents at
    beginning of period
3,873
1,962
1,962
2,229
1,927
Cash and cash equivalents at end of
    period
$
3,213
$
1,866
$
3,873
$
1,962
$
2,229
Supplemental disclosure of cash
    flow information
Interest paid to third parties
$
—
$
1,339
$
3,136
$
12,381
$
11,772
See accompanying notes to the combined financial statements.
F-56
FORTRESS CCRC PORTFOLIO
NOTES TO COMBINED FINANCIAL STATEMENTS
(Dollars in thousands)
1.
Description of Business
The combined financial statements present the financial position
and the results of operations related only to eight continuing
care retirement communities owned and operated by The National
Benevolent Association of the Christian Church (Disciples of
Christ) (the "NBA"). In April 2005, Fortress CCRC
Acquisition LLC ("Fortress") purchased the property
and equipment and accounts receivable of eight senior living
facilities from NBA for approximately $179,200 and assumed the
liabilities associated with entrance fees related to the
properties. No other assets were purchased and no other
liabilities were assumed. All eight facilities are included in
the combined financial statements for the periods presented. For
purposes of the combined financial statements, the facilities
are referred to as the "Fortress CCRC Properties." The
Fortress CCRC Properties are located in various cities
throughout the United States and consist of the following:
Facilities
Location
Total Units
Cypress Village
Jacksonville, FL
523
Robin Run Village
Indianapolis, IN
283
Village at Skyline
Colorado Springs, CO
503
Ramsey Home
Des Moines, IA
139
Patriot Heights
San Antonio, TX
232
Foxwood Springs Living Center
Raymore, MO
311
Heritage Crossing
Edmond, OK
233
Heatherwood Village
Newton, KS
189
2,413
Four of the above facilities have an aggregate of
825 single family homes at March 31, 2005 that are
independently owned by the residents of the homes. The
Fortress CCRC Properties are responsible for maintenance of
those homes for which they receive monthly service fees.
2.
Bankruptcy Filing
On or about December 1, 2003, the NBA failed to make
scheduled payments with respect to the loans securing certain of
the fixed rate bond issues, including bonds related to the
Fortress CCRC Properties, and further failed to make certain
payments due to a financial institution, pursuant to which the
letters of credit that supported the variable rate bonds were
issued, including bonds related to the Fortress CCRC Properties.
In addition, in September 2003, the NBA failed to repay certain
loans and other financial obligations when they became due. As a
result of these events, various lenders declared certain events
of default under the respective documents evidencing and/or
governing such bonds, loans, and other obligations and filed
certain lawsuits against the NBA.
On February 16, 2004 (the "Petition Date"), the
NBA and certain of its affiliates (including the operations of
the Fortress CCRC Properties, collectively, referred to herein
as a "debtor-in-possession") filed voluntary petitions
under Chapter 11 of Title 11 of the United States Code
(the "Bankruptcy Code") in the United States
Bankruptcy Court Western District of Texas —
San Antonio Division (the "Bankruptcy Court").
The NBA and each of such entities were debtors-in-possession
under the Bankruptcy Code.
Pursuant to the Bankruptcy Code, neither the NBA nor any of the
debtors-in-possession were permitted to make principal,
interest, or other debt service payments with respect to the
loans securing the fixed rate bonds or the variable rate bonds
or with respect to other reimbursement obligations.
F-57
FORTRESS CCRC PORTFOLIO
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands)
In conjunction with a mediation process ordered by the
Bankruptcy Court, the NBA, in September 2004, entered into an
agreement pursuant to which it agreed, at the request of its
creditors and was subsequently approved by the Bankruptcy Court,
to sell 11 of its senior living facilities (including the
Fortress CCRC Properties), to Fortress. The sale of 11
properties closed during the period April 6, 2005 through
May 19, 2005, at which time Fortress sold the three
non-Fortress CCRC Properties to third parties.
On December 29, 2004, the NBA and its creditors filed a
Joint Disclosure Statement for Joint Plan of Reorganization and
a Joint Plan of Reorganization with the Bankruptcy Court. The
Joint Disclosure Statement was approved by the Bankruptcy Court
on January 19, 2005. Since that date, the Plan of
Reorganization has been approved by the creditors, and on
March 2, 2005, the Plan of Reorganization was confirmed by
the Bankruptcy Court.
3.
Summary of Significant Accounting Policies
Basis of Presentation
The combined financial statements include the accounts related
to the operations of the Fortress CCRC Properties. All
significant intercompany balances and transactions are
eliminated in combination. The combined financial statements are
presented as if the Fortress CCRC Properties had operated
as one combined entity.
The Fortress CCRC Properties' unaudited combined
financial statements as of March 31, 2005 and for the three
months ended March 31, 2005 and 2004, have been prepared in
accordance with accounting principles generally accepted in the
United States ("GAAP") for interim financial
information. Accordingly, they do not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, all normal recurring
accruals considered necessary for a fair presentation have been
included. All amounts included in the footnotes to the combined
financial statement, referring to March 31, 2005 and for
the three months ended March 31, 2005 and 2004 are
unaudited. Operating results for the three month period ended
March 31, 2005 are not necessarily indicative of the
results that may be expected for the year ending
December 31, 2005.
The majority of the Fortress CCRC Properties' net
assets are unrestricted. The temporarily restricted net assets
activity was $(30), $(87), $(57), $(61) and $(162) for the three
months ended March 31, 2005 and 2004 and for the years
ended December 31, 2004, 2003 and 2002, respectively. The
permanently restricted net assets activity was $0, $348, $348,
$92, and $173 for the three months ended March 31, 2005 and
2004 and for the years ended December 31, 2004, 2003 and
2002, respectively.
Use of Estimates
The preparation of the combined financial statements in
accordance with GAAP requires management to make estimates and
assumptions that affect amounts reported and disclosures of
contingent assets and liabilities in the combined financial
statements and accompanying notes. Actual results could differ
from those estimates and assumptions.
Cash Equivalents
All investments with an original maturity of three months or
less are considered to be cash equivalents. No investments were
purchased by Fortress.
F-58
FORTRESS CCRC PORTFOLIO
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands)
Marketable Securities and Long-Term Investments
Investments in marketable securities are carried at market
value. Realized and unrealized gains and losses are reflected in
the combined statements of activities. These investments are
classified as either marketable securities or long-term
investments in the combined statements of financial position.
These classifications are made to divide those investments held
in conjunction with pooled investment trusts, living trusts,
unitrusts, annuity trusts, and endowment agreements from those
investments classified as available to support current
operations. The marketable securities and long term investments
were not purchased by Fortress.
Property and Equipment
Property and equipment are carried at cost less accumulated
depreciation. Expenditures for ordinary maintenance and repairs
are expensed to operations as incurred. Renovations and
improvements, which improve and/or extend the useful life of the
asset are capitalized and depreciated over their estimated
useful life, or if the renovations or improvements are made with
respect to facilities subject to an operating lease, over the
shorter of the estimated useful life of the renovations or
improvements, or the term of the operating lease.
In accordance with Statement of Financial Accounting Standards
("SFAS") No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets and Long-Lived Assets to Be
Disposed, the Fortress CCRC Properties will record
impairment losses on long-lived assets used in operations when
events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be
generated by those assets during the expected hold period are
less than the carrying amounts of those assets. Impairment
losses will be measured as the difference between carrying value
and fair value of assets.
Depreciation is provided on a straight-line basis over the
estimated useful lives of assets, which are as follows:
Asset Category
Estimated Useful Life
Buildings and improvements
25 - 40 years
Furniture and equipment
3 - 10 years
Bond Proceeds Held by Trustee
The Fortress CCRC Properties are required to maintain
separate accounts for proceeds of bond financings. These
accounts are comprised of cash, money market accounts, and
government-issued debt securities. Government-issued debt
securities are valued at market and have maturity dates which
approximate the cash needs relative to the respective
construction project or debt service requirement.
Goodwill
Goodwill, in the original amount of $3,500, represents the cost
of assets in excess of the book value of the net assets at the
acquisition date of the properties. Goodwill was amortized at a
rate of approximately $88 per year over 40 years on a
straight-line basis through 2031. Accumulated amortization was
$1,159, $1,137 and $1,049 at March 31, 2005 and
December 31, 2004 and 2003, respectively.
F-59
FORTRESS CCRC PORTFOLIO
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands)
Deferred Financing Costs
Deferred financing costs are recorded at cost and amortized on a
straight-line basis, which approximates the level yield method,
over the term of the related debt and are included in interest
expense.
Resident Fee Revenue
Resident fee revenue is recorded when services are rendered and
consists of fees for basic housing (including maintenance on
owned units), support services and fees associated with
additional services such as personalized health and assisted
living care. These amounts have been classified as long-term
liabilities due to the contingency related to their payment.
Unearned Entrance Fees
Unearned entrance fees represent payments received in exchange
for the right to occupy apartments or independent living units.
Many of the contracts associated with these arrangements
stipulate that the residents are entitled to refunds of a
percentage of their entrance fees from reoccupancy proceeds
obtained from the subsequent right to occupy their units. The
refundable portion of an entrance fee is required to be
amortized over the estimated useful life of the facility. The
nonrefundable portion is to be amortized over the estimated
remaining life of the resident. The unamortized refundable
entrance fees have been classified as long-term due to the
contingencies related to the repayment of the fee.
Donated Property and Gifts
Contributions of property and materials are recorded as support
in these combined financial statements at their estimated fair
value at the date of gift. Absent donor stipulations on the use
of these assets, these gifts are recorded as unrestricted
support.
Income Taxes
The NBA and its operating units are exempt from federal income
tax under the provisions of Section 501(c)(3) of the
Internal Revenue Code. Accordingly, these combined statements do
not include a provision for federal income tax.
Fair Value of Financial Instruments
Cash and cash equivalents and bond proceeds held by the trustee
are reflected in the accompanying combined balance sheets at
amounts considered by management to reasonably approximate fair
value. As of March 31, 2005 and December 31, 2004, the
fair value of bonds payable approximates book value based upon
the interest rate determined under the NBA's approved
bankruptcy plan.
F-60
FORTRESS CCRC PORTFOLIO
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands)
4.
Investments in Marketable Securities
Investments in marketable securities consisted of the following
at March 31, 2005 and December 31, 2004 and 2003:
Marketable
Long-Term
Securities
Investments
Total Market Value
March 31, 2005
$
7,024
$
2,499
$
9,523
December 31, 2004
$
16,309
$
2,499
$
18,808
December 31, 2003
$
18,816
$
2,151
$
20,967
The majority of the marketable securities are invested in the
Total Return Plan. The objective of the Total Return Plan is to
generate a return on investment through appreciation in market
value and income. Subject to the liquidity requirements of the
Total Return Plan, it is part of the investment policy to have
the assets of such plan invested in debt and equity securities
depending on the economic outlook and/or general market
conditions at that time. Because of extreme market volatility,
the NBA took action to invest the Total Return Plan exclusively
in U.S. Treasury bonds and notes and government agency
securities. At December 31, 2004 and 2003, the Total Return
Plan remained predominantly invested in U.S. Treasury bonds
and notes and government agency securities. At December 31,
2004, the Total Return Plan portfolio had an average duration of
approximately 1.35 years and an average maturity of
approximately 1.69 years.
5.
Property and Equipment
Property and equipment consist of the following:
December 31,
March 31,
2005
2004
2003
Land
$
5,745
$
5,745
$
6,138
Buildings and improvements
200,460
200,460
206,645
Furniture and equipment
18,216
18,082
17,570
Construction in progress
1,393
856
502
225,814
225,143
230,855
Accumulated depreciation and
    amortization
(75,995
)
(74,065
)
(66,586
)
Property and equipment, net
$
149,819
$
151,078
$
164,269
In connection with the sale to Fortress described in
Note 1, certain Fortress CCRC Properties (Village at
Skyline, Ramsey Home, Heritage Crossing and Heatherwood Village)
incurred a total impairment charge of $9,063 as of
December 31, 2004, based upon the sale proceeds received.
F-61
FORTRESS CCRC PORTFOLIO
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands)
6.
Bonds Payable
Bonds payable consists of the following:
December 31,
March 31,
2005
2004
2003
Taxable and tax-exempt bonds
    payable with original terms bearing interest at fixed rates
    ranging from 4.1% to 7.8% payable in semi-annual installments
    and annual principal payments with original maturity dates from
    2022 through 2030
$
137,825
$
137,825
$
137,825
Taxable and tax-exempt bonds
    payable with original terms bearing interest at floating rates
    determined by the remarketing agent for the bonds, payable in
    monthly installments of principal and interest, as defined in
    the bond agreements, maturity dates from 2022 through 2031
46,605
46,605
46,605
Total bonds payable
184,430
184,430
184,430
Unamortized discount
(1,351
)
(1,377
)
(1,484
)
Total bonds payable, net
$
183,079
$
183,053
$
182,946
In late 2003, the NBA ceased making debt service payments and on
February 16, 2004 filed for bankruptcy protection. Since no
debt service payments were being made, the bonds were in default
and have been classified as current at December 31, 2004
and 2003 and March 31, 2005. Under the terms of the
bankruptcy plan, the interest rate on all of the above bonds was
fixed at 2.17% per annum, and a new maturity date was set
as of February 28, 2005.
Included in interest expense is amortization of original issue
discount of $26, $27, $107, $110 and $105 for the three months
ended March 31, 2005 and 2004 and for the years ended
December 31, 2004, 2003 and 2002, respectively.
The NBA and certain related entities are jointly and severally
obligated for the repayment of the above bonds. The Bond
Proceeds held by Trustee are pledged to secure repayment of the
related bonds.
F-62
FORTRESS CCRC PORTFOLIO
NOTES TO COMBINED FINANCIAL
STATEMENTS — (Continued)
(Dollars in thousands)
7.
Related Party Transactions
The Fortress CCRC Properties are managed by the NBA for a
fee based on 4% of adjusted gross expenses, as defined by
management. Fees paid to NBA were $893, $842, $3,548, $3,320,
and $3,187 for the three months ended March 31, 2005 and
2004 and for the years ended December 31, 2004, 2003, and
2002, respectively.
Due to Parent represents amounts advanced by the NBA to support
the operations of the Fortress CCRC Properties. These
amounts were payable upon demand. Gross due to Parent balances
bear interest at 6%, per annum (represents interest
expense-affiliate). All unpaid interest was added to the due to
Parent balance.
8.
Unearned Entrance Fees
The activity for unearned entrance fees is as follows:
December 31,
March 31,
2005
2004
2003
Beginning balance
$
30,197
$
35,013
$
37,116
Additions
686
3,185
7,212
Amortization
(560
)
(2,430
)
(2,841
)
Refunds
(537
)
(5,571
)
(6,474
)
Ending balance
$
29,786
$
30,197
$
35,013
In 2004, the NBA settled a lawsuit with certain occupants of the
Fortress CCRC Properties related to entrance fees. Under
the terms of the agreement, the NBA was required to refund
approximately $3.7 million to these occupants, which has
been reflected in the 2004 refunds in the table above.
9.
Commitments and Contingencies
Litigation
The Fortress CCRC Properties are involved in various
lawsuits and are subject to various claims arising in the normal
course of business. In the opinion of management, although the
outcomes of these suits and claims are uncertain, in the
aggregate, they should not have a material adverse effect on the
Fortress CCRC Properties' business, financial
condition and results of activities.
F-63
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholder of Brookdale Living Communities, Inc.
We have audited the accompanying combined balance sheets of the
properties comprising the Prudential Portfolio (the
"Properties") as of December 31, 2004 and 2003,
and the related combined statements of operations, members'
equity and cash flows for each of the three years in the period
ended December 31, 2004. These financial statements are the
responsibility of the Properties' management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Properties' internal control over financial
reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Properties' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined financial
position of the Properties at December 31, 2004 and 2003,
and the combined results of their operations and their cash
flows for each of the three years in the period ended
December 31, 2004, in conformity with U.S. generally
accepted accounting principles.
/s/  Ernst & Young LLP
Chicago, Illinois
June 7, 2005
F-64
PRUDENTIAL PORTFOLIO
COMBINED BALANCE SHEETS
(In thousands)
December 31,
March 31,
2005
2004
2003
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
1,817
$
1,571
$
1,762
Restricted cash
700
632
633
Accounts receivable
187
199
207
Prepaid expenses and other
772
560
221
Total current assets
3,476
2,962
2,823
Property and equipment
161,243
161,159
159,993
Accumulated depreciation
(23,078
)
(21,924
)
(17,121
)
Property and equipment, net
138,165
139,235
142,872
Deferred financing costs, net
340
385
655
Deferred rent receivable
545
534
468
Total assets
$
142,526
$
143,116
$
146,818
Liabilities and Members'
    Equity
Current liabilities:
Current portion of debt
$
71,081
$
64,819
$
2,032
Trade accounts payable and accrued
    expenses
1,263
1,561
1,325
Deferred revenue
1,104
797
950
Total current liabilities
73,448
67,177
4,307
Long-term debt, less current portion
31,982
38,752
103,546
Total liabilities
105,430
105,929
107,853
Members' equity
37,096
37,187
38,965
Total liabilities and members'
    equity
$
142,526
$
143,116
$
146,818
See accompanying notes to the combined financial statements.
F-65
PRUDENTIAL PORTFOLIO
COMBINED STATEMENTS OF OPERATIONS
(In thousands)
Three Months
Ended March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
(Unaudited)
Revenue
Resident fees
$
11,620
$
10,920
$
45,118
$
41,853
$
40,227
Property rental income
580
545
2,249
2,270
2,095
Total revenue
12,200
11,465
47,367
44,123
42,322
Expenses
Facility operating
6,780
6,222
26,537
25,035
24,777
Ground lease
252
252
1,008
1,008
1,008
Management fees —
    affiliate
803
762
3,332
2,867
2,320
Depreciation and amortization
1,268
1,251
5,087
4,994
4,702
Total operating expenses
9,103
8,487
35,964
33,904
32,807
Income from operations
3,097
2,978
11,403
10,219
9,515
Interest expense
(1,367
)
(1,162
)
(4,827
)
(5,000
)
(5,629
)
Net income
$
1,730
$
1,816
$
6,576
$
5,219
$
3,886
See accompanying notes to the combined financial statements.
F-66
PRUDENTIAL PORTFOLIO
COMBINED STATEMENTS OF MEMBERS' EQUITY
For Three Months Ended March 31, 2005
and for Years Ended December 31, 2004, 2003 and 2002
(In thousands)
Total
Members'
Equity
Balance at January 1,
    2002
$
47,962
Net income
3,886
Distributions
(6,155
)
Contributions
468
Balance at December 31,
    2002
46,161
Net income
5,219
Distributions
(15,240
)
Contributions
2,825
Balance at December 31,
    2003
38,965
Net income
6,576
Distributions
(8,599
)
Contributions
245
Balance at December 31,
    2004
37,187
Net income (unaudited)
1,730
Distributions (unaudited)
(1,821
)
Balance at March 31, 2005
    (unaudited)
$
37,096
See accompanying notes to the combined financial statements.
F-67
PRUDENTIAL PORTFOLIO
COMBINED STATEMENTS OF CASH FLOWS
For Three Months Ended March 31, 2005
and for Years Ended December 31, 2004, 2003 and 2002
(In thousands)
Three Months
Ended
March 31,
Year Ended December 31,
2005
2004
2004
2003
2002
(Unaudited)
Operating activities
Net income
$
1,730
$
1,816
$
6,576
$
5,219
$
3,886
Adjustments to reconcile net income
    to net cash provided by operating activities:
Depreciation and amortization
1,268
1,251
5,087
4,994
4,702
Changes in operating assets and
    liabilities:
Net change in restricted cash
(68
)
(46
)
1
35
185
Accounts receivable
12
24
8
(42
)
24
Deferred rent receivable
(11
)
(17
)
(66
)
(87
)
(109
)
Prepaid expenses and other assets
(212
)
(426
)
(339
)
92
2
Accounts payable and accrued
    expenses
(298
)
(268
)
236
(92
)
(177
)
Deferred revenue
307
(30
)
(153
)
50
302
Net cash provided by operating
    activities
2,728
2,304
11,350
10,169
8,815
Investing activities
Additions to property, and equipment
(153
)
(262
)
(1,180
)
(916
)
(842
)
Cash used in investing activities
(153
)
(262
)
(1,180
)
(916
)
(842
)
Financing activities
Proceeds from debt
34
—
37
40,200
14,650
Repayment of debt
(542
)
(517
)
(2,044
)
(36,555
)
(15,951
)
Distributions to members
(1,821
)
(1,968
)
(8,599
)
(15,240
)
(6,155
)
Contributions from members
—
—
245
2,825
468
Payment of financing costs
—
—
—
(494
)
(211
)
Net cash used in financing
    activities
(2,329
)
(2,485
)
(10,361
)
(9,264
)
(7,199
)
Net increase (decrease) in cash and
    cash equivalents
246
(443
)
(191
)
(11
)
774
Cash and cash equivalents at
    beginning of period
1,571
1,762
1,762
1,773
999
Cash and cash equivalents at end of
    period
$
1,817
$
1,319
$
1,571
$
1,762
$
1,773
Supplemental non-cash
    activity
Write-off of fully depreciated
    property and equipment
$
69
$
—
$
14
$
—
$
—
Write-off of fully amortized
    deferred financing costs
$
—
$
370
$
904
$
—
$
—
Supplemental disclosure of cash
    flow information
Interest paid
$
1,459
$
1,162
$
4,829
$
4,906
$
5,703
See accompanying notes to the combined financial statements.
F-68
PRUDENTIAL PORTFOLIO
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2004
(In thousands)
1.
Description of Business
The combined financial statements present the operations of nine
assisted living properties owned by limited liability companies
under common control and ownership of affiliates of Prudential
Financial, Inc. and whose day-to-day operations are managed by
Renaissance Senior Living, LLC ("RSL"). RSL also has
an ownership interest in the properties. All nine
properties' operations are included in the combined
financial statements for the periods presented. For purposes of
the combined financial statements, the properties are referred
to as the "Prudential Properties." The Prudential
Properties are located in various cities in the state of
California and consist of the following:
Facilities
Location
Total Units
Inn at the Park
Irvine
134
Nohl Ranch Inn
Anaheim Hills
127
Mirage Inn
Rancho Mirage
125
Pacific Inn
Torrance
134
Ocean House
Santa Monica
117
The Gables
Monrovia
64
The Lexington
Ventura
114
Oak Tree Villa
Scotts Valley
196
Lodge at Paulin Creek
Santa Rosa
250
1,261
Summary of Significant Accounting Policies
Basis of Presentation
The combined financial statements include the accounts of
Prudential Properties. All significant intercompany balances and
transactions are eliminated in combination. The combined
financial statements are presented as if the Prudential
Properties had operated as one combined entity.
The Prudential Properties' unaudited combined financial
statements as of March 31, 2005 and for the three months
ended March 31, 2005 and 2004, have been prepared in
accordance with accounting principles generally accepted in the
United States ("GAAP") for interim financial
information. Accordingly, they do not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. All amounts included
in the footnotes to the combined financial statements, referring
to March 31, 2005 and for the three months ended
March 31, 2005 and 2004 are unaudited. Operating results
for the three month period ended March 31, 2005 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 2005.
Use of Estimates
The preparation of the combined financial statements in
accordance with GAAP requires management to make estimates and
assumptions that affect amounts reported and disclosures of
contingent assets and liabilities in the combined financial
statements and accompanying notes. Actual results could differ
from those estimates and assumptions.
F-69
PRUDENTIAL PORTFOLIO
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2004
(In thousands)
Cash Equivalents
The Prudential Properties considers all investments with an
original maturity of three months or less to be cash equivalents.
Resident Fee Revenue
Resident fee revenue is recorded when services are rendered and
consists of fees for basic housing, support services and fees
associated with additional services such as personalized health
and assisted living care. Residency agreements are generally for
a term of one year.
Property Rental Income
The Prudential Properties leases a portion of one its facilities
to a third party that operates a skilled nursing facility. The
Prudential Properties records rental income on a straight-line
basis as earned during the lease term. The lease also requires
the tenant to reimburse the Prudential Properties for the
tenant's share of common area maintenance, real estate
taxes and other recoverable costs. Tenant reimbursement revenue
is recognized as the related expenses are incurred.
Income Taxes
No provision for federal income taxes is included in the
combined financial statements since such taxes, if any, are
payable by the owners of the Renaissance Properties.
Property and Equipment
Property and equipment are carried at cost less accumulated
depreciation. Expenditures for ordinary maintenance and repairs
are expensed to operations as incurred. Renovations and
improvements, which improve and/or extend the useful life of the
asset are capitalized and depreciated over their estimated
useful life, or if the renovations or improvements are made with
respect to facilities subject to an operating lease, over the
shorter of the estimated useful life of the renovations or
improvements, or the term of the operating lease.
In accordance with Statement of Financial Accounting Standards
("SFAS") No. 144,
Accounting for the
Impairment or Disposal of Long-Lived Assets and Long-Lived
Assets to Be Disposed
, the Prudential Properties will record
impairment losses on long-lived assets used in operations when
events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be
generated by those assets during the expected holding period are
less than the carrying amounts of those assets. Impairment
losses will be measured as the difference between carrying value
and fair value of assets.
Depreciation is provided on a straight-line basis over the
estimated useful lives of assets, which are as follows:
Asset Category
Estimated Useful Life
Buildings and improvements
30 years
Furniture and equipment
3 - 7 years
F-70
PRUDENTIAL PORTFOLIO
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2004
(In thousands)
Deferred Costs
Deferred financing costs are recorded at cost and amortized on a
straight-line basis, which approximates the level yield method,
over the term of the related debt. Accumulated amortization was
$428, $383 and $1,017 at March 31, 2005 and
December 31, 2004 and 2003, respectively.
Restricted Cash
Restricted cash consists of amounts held in escrow for the
payment of future real estate taxes.
Fair Value of Financial Instruments
Cash and cash equivalents, restricted cash and variable rate
debt are reflected in the accompanying combined balance sheets
at amounts considered by management to reasonably approximate
fair value. Management estimates the fair value of its long-term
fixed rate debt using a discounted cash flow analysis based upon
Prudential Properties' current borrowing rate for debt with
similar maturities. As of March 31, 2005 and
December 31, 2004 and 2003, the fair value of fixed-rate
debt approximates book value.
Property and Equipment
Property and equipment consist of the following:
December 31,
March 31,
2005
2004
2003
Land
$
33,872
$
33,872
$
33,872
Buildings and improvements
123,701
123,676
123,279
Furniture and equipment
3,670
3,611
2,842
161,243
161,159
159,993
Accumulated depreciation and
    amortization
(23,078
)
(21,924
)
(17,121
)
Property and equipment, net
$
138,165
$
139,235
$
142,872
F-71
PRUDENTIAL PORTFOLIO
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2004
(In thousands)
Debt
Long-term Debt
Long-term debt consists of the following as of:
December 31,
March 31,
2005
2004
2003
Mortgage notes payable bearing
    interest at fixed rates ranging from 4.47% to 7.50% payable in
    monthly installments of principal and, interest maturity dates
    from April 2005 through April 2008
$
53,486
$
53,740
$
54,604
Mortgage notes payable bearing
    interest at variable rates ranging from LIBOR (2.87% and 2.4% at
    March 31, 2005 and December 31, 2004, respectively)
    plus 2.20% to LIBOR plus 2.40%, payable in monthly installments
    of principal and interest, maturity dates in 2005
49,525
49,771
50,923
Promissory notes payable to various
    financial institutions bearing interest at fixed rates ranging
    from 6.5% to 9.75% payable in monthly installments of principal
    and interest, maturity dates ranging from May 2005 through April
    2008
52
60
51
Total debt
103,063
103,571
105,578
Less current portion
(71,081
)
(64,819
)
(2,032
)
Total long-term debt
$
31,982
$
38,752
$
103,546
The mortgages notes payable are subject to various operating
covenants. In addition, Prudential Properties must periodically
fund and maintain escrow accounts, to make future real estate
taxes, repairs and maintenance and insurance payments. These are
included in prepaid expenses and other assets. In 2004, certain
mortgage notes payable were extended and converted to fixed rate
debt.
Substantially all of Prudential Properties' property and
equipment have been pledged as collateral for its mortgages
notes payable and promissory notes payable.
The annual aggregate scheduled maturities of long-term debt
obligations outstanding as of December 31, 2004 are as
follows:
Year Ending December 31
Amount
2005
$
64,819
2006
727
2007
753
2008
37,272
$
103,571
Payment of mortgage debt is anticipated through the planned sale
of the Prudential Properties in 2005.
F-72
PRUDENTIAL PORTFOLIO
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2004
(In thousands)
Management Fees — Affiliate
The Prudential Properties are managed by RSL for a fee based on
5% of gross revenue. In addition, RSL can earn an incentive fees
based upon a percentage of specified net operating income, as
defined. Fees paid to RSL were $803, $762, $3,332, $2,867, and
$2,320 for the three months ended March 31, 2005 and 2004
and for the years ended December 31, 2004, 2003, and 2002,
respectively.
Property Leasing Arrangement
One of the Prudential Properties leases a portion of the
property to a skilled nursing facility operator under an
operating lease. The lease provides for an initial noncancelable
term through 2013 and provides for the tenant to pay their pro
rata share of operating expenses and real estate taxes.
Minimum future rentals under the lease as of December 31,
2004 are as follows:
Year
Amount
2005
$
920
2006
942
2007
966
2008
990
2009
1,015
Thereafter
4,129
$
8,962
Commitments and Contingencies
Litigation
The Prudential Properties are involved in various lawsuits and
subject to various claims arising in the normal course of
business. In the opinion of management, although the outcomes of
these suits and claims are uncertain, in the aggregate, they are
not anticipated to have a material adverse effect on Prudential
Properties' business, financial condition and results of
operations.
Ground Lease
One of the Prudential Properties is subject to a ground lease
with an initial lease term through 2016, and two, 33-year
extension options.
Minimum future payments under the lease as of December 31,
2004 are as follows:
Year
Amount
2005
$
1,000
2006
1,000
2007
1,000
2008
1,000
2009
1,000
Thereafter
6,958
$
11,958
F-73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
Alterra Healthcare Corporation:
We have audited the accompanying consolidated balance sheet of
Alterra Healthcare Corporation and subsidiaries (the Predecessor
Company) as of December 31, 2002, and the related
consolidated statements of operations, changes in
stockholders' deficit, and cash flows for the period from
January 1, 2003 to November 30, 2003 and the year
ended December 31, 2002. These consolidated financial
statements are the responsibility of the Predecessor
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Corporation's internal control
over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of the Predecessor Company as of
December 31, 2002, and the results of their operations and
their cash flows for the period from January 1, 2003 to
November 30, 2003 and the fiscal year ended
December 31, 2002 in conformity with U.S. generally
accepted accounting principles.
As discussed in notes 1 and 2 to the consolidated financial
statements, the Corporation emerged from Chapter 11
bankruptcy on December 4, 2003. Upon emergence from
bankruptcy, the Corporation changed its basis of financial
statement presentation to reflect the adoption of fresh start
accounting in accordance with AICPA Statement of
Position 90-7,
Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code.
/s/ KPMG LLP
Milwaukee,Wisconsin
April 13, 2004
F-74
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 2002
(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents
$
13,797
Accounts receivable, net of
    allowance for bad debts
10,253
Assets held for sale
57,243
Prepaid expenses and supply
    inventory
14,672
Other current assets
12,803
Total current assets
108,768
Property and equipment, net
492,125
Restricted cash and investments
2,188
Goodwill, net
35,515
Other assets
33,509
Total assets
$
672,105
Liabilities and
    Stockholders' Deficit
Current liabilities:
Current installments of long-term
    obligations, including convertible debt
$
722,689
Current debt maturities on assets
    held for sale
79,108
Short-term notes payable
7,144
Accounts payable
6,812
Accrued expenses
92,151
Guaranty liability
58,500
Deferred rent and refundable
    deposits
14,840
Total current liabilities
981,244
Long-term obligations, less current
    installments
171,510
Other long-term liabilities
2,147
Redeemable preferred stock
6,132
Stockholders' deficit:
Predecessor Company Preferred
    stock, Authorized 2,500,000 shares; designated
    1,550,000 shares; none outstanding
—
Predecessor Company Common stock,
    $0.01 par value. Authorized 100,000,000 shares; issued
    and outstanding 22,266,262 shares
221
Predecessor Company Treasury stock,
    $0.01 par value. 11,639 shares
(163
)
Additional paid-in capital
179,526
Accumulated deficit
(668,512
)
Total stockholders' deficit
(488,928
)
Total liabilities and
    stockholders' deficit
$
672,105
See accompanying notes to consolidated financial statements.
F-75
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Periods January 1, 2003 to November 30,
2003,
and Fiscal Year Ended December 31, 2002
(In thousands)
11 Months
Fiscal Year
Ended
Ended
November 30,
December 31,
2003
2002
Revenue:
Resident service fees
$
378,672
$
413,553
Management fees
824
2,601
Miscellaneous
546
561
Operating revenue
380,042
416,715
Operating expenses (income):
Residence operations
264,069
285,171
Bad debt provision
3,693
2,263
Lease expense
57,846
58,658
Gain on lease termination
—
(6,204
)
Lease income
(3,811
)
(13,755
)
General and administrative
33,703
46,541
Loss (gain) on disposal of
    property and equipment
9,569
(22,914
)
Depreciation and amortization
21,292
25,766
Impairment charges
2,859
4,773
Total operating expenses
389,220
380,299
Operating income (loss)
(9,178
)
36,416
Other (expense) income:
Interest expense, net
(29,851
)
(50,556
)
Amortization of financing costs
(2,648
)
(4,967
)
Gain on debt extinguishments
13,683
—
Gain on fresh start debt discharge
622,357
—
Convertible debt payment-in-kind
    (PIK) interest
(3,656
)
(25,824
)
Equity in losses of unconsolidated
    affiliates
(667
)
(4,856
)
Reorganization items
(28,697
)
—
Fresh start accounting adjustments
(39,363
)
—
Goodwill impairment loss
—
(9,487
)
Total other (expense) income,
    net
531,158
(95,690
)
(Loss) income before income taxes
    and the cumulative effect of a change in accounting principle
521,980
(59,274
)
Income tax expense
(119
)
(100
)
(Loss) income from continuing
    operations before cumulative effect of a change in accounting
    principle
521,861
(59,374
)
Loss on discontinued operations
(32,933
)
(116,762
)
Cumulative effect of change in
    accounting principle
—
(45,866
)
Net (loss) income
$
488,928
$
(222,002
)
See accompanying notes to consolidated financial statements.
F-76
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (DEFICIT)
For the Periods January 1, 2003 to November 30,
2003,
and Fiscal Year Ended December 31, 2002
(In thousands)
Common Stock,
Treasury Stock,
and Additional
Paid-in Capital
Shares
Accumulated
Predecessor Company
Outstanding
Amounts
Deficit
Total
Balances at December 31, 2001
22,266
179,584
(446,510
)
(266,926
)
Net loss
—
—
(222,002
)
(222,002
)
Balances at December 31, 2002
22,266
179,584
(668,512
)
(488,928
)
Net loss for the 11 months
    ended November 30, 2003
—
—
(94,066
)
(94,066
)
Balance prior to application of
    fresh start accounting
22,266
$
179,584
(762,578
)
(582,994
)
Application of fresh start
    accounting
—
—
582,994
582,994
Cancellation of Predecessor Company
    equity
(22,266
)
(179,584
)
179,584
—
Balances at November 30, 2003
    of Predecessor Company
—
—
—
—
See accompanying notes to consolidated financial statements.
F-77
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods January 1, 2003 to November 30,
2003,
and Fiscal Year Ended December 31, 2002
(In thousands)
11 Months
Fiscal Year
Ended
Ended
November 30,
December 31,
2003
2002
Cash flows from operating
    activities:
Net (loss) income
$
488,928
$
(222,002
)
Adjustment to reconcile net (loss)
    income to net cash (used in) provided by operating activities:
Cumulative effect of change in
    accounting principle
—
45,866
Gain on debt extinguishments
(13,683
)
—
Gain on fresh start debt discharge
(622,357
)
—
Fresh start accounting adjustments
39,363
—
Depreciation and amortization
21,292
25,766
Bad debt provision
3,693
2,263
Payment-in-kind interest
3,656
25,824
Amortization of financing costs
2,648
4,967
Loss (gain) on disposal of
    property and equipment
9,569
(22,914
)
Impairment charges
2,859
14,260
Loss on discontinued operations
32,933
116,762
Income tax expense
119
100
Equity in losses from
    unconsolidated affiliates
667
4,856
Decrease (increase) in net resident
    receivable
(2,890
)
(4,261
)
Decrease in other current assets
4,269
6,057
(Decrease) increase in accounts
    payable
(1,932
)
3,467
(Decrease) increase in accrued
    expenses and deferred rent
8,908
12,165
(Decrease) increase in past due
    interest and late fees
(1,621
)
10,373
Changes in other assets and
    liabilities, net
1,496
(2,672
)
Net cash (used in) provided by
    operating activities
(22,083
)
20,877
Cash flows (used in) from investing
    activities:
Payments for property and equipment
(6,832
)
(8,544
)
Net proceeds from sale of property
    and equipment
26,760
60,280
Proceeds from sale/leaseback
    transactions
62,368
39,825
Decrease in notes receivable, net
    of reserve
—
500
Changes in investments in and
    advances to unconsolidated affiliates
1,121
(159
)
Purchase of joint venture
    partnership interests
—
(1,400
)
Net cash provided by investing
    activities
83,417
90,502
F-78
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS — (Continued)
For the Periods January 1, 2003 to November 30,
2003,
and Fiscal Year Ended December 31, 2002
(In thousands)
11 Months
Fiscal Year
Ended
Ended
November 30,
December 31,
2003
2002
Cash flows (used in) from financing
    activities:
Repayments of short-term borrowings
(6,724
)
(3,609
)
Repayments of debtor-in-possession
    credit facility
(14,870
)
—
Repayments of long-term obligations
(100,877
)
(111,314
)
Proceeds from issuance of debt
31,870
—
Payments for financing costs
(2,558
)
(2,655
)
Equity contribution
76,000
—
Net cash used in financing
    activities
(17,159
)
(117,578
)
Net (decrease) increase in cash and
    cash equivalents
44,175
(6,199
)
Cash and cash equivalents:
Beginning of period
13,797
19,996
End of period
$
57,972
$
13,797
Supplemental disclosure of cash
    flow information:
Cash paid for interest, net of
    amounts capitalized
$
35,739
$
55,574
Cash paid (refunded) for
    reorganization items
7,298
—
Cash paid during year for income
    taxes
92
(333
)
Noncash items:
Notes issued in exchange for joint
    venture interests
—
1,000
Deconsolidated assets related to
    subsidiary stock transfer
—
189,221
Deconsolidated liabilities related
    to subsidiary stock transfer
—
174,534
See accompanying notes to consolidated financial statements.
F-79
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
(1)
Nature of Business and Reorganization and Emergence From
    Chapter 11
Alterra Healthcare Corporation (when referring to both the
Predecessor Company and the Successor Company the term
"Company" is used), develops, owns, and operates
assisted living residences. As of November 30, 2003, the
Successor Company operated and managed 332 residences located
throughout the United States with approximate capacity to
accommodate 15,300 residents.
On January 22, 2003, the Predecessor Company Alterra
Healthcare Corporation (hereinafter referred to as the
Predecessor Company) filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code (the
Bankruptcy Code) in the United States Bankruptcy Court for the
District of Delaware in Wilmington (the Bankruptcy Court) (Case
No. 03-10254). All other subsidiaries or affiliates of the
Predecessor Company were excluded from the proceeding and
continued to conduct business in the ordinary course. The
Predecessor Company remained in possession of its assets and
properties and continued to operate its business as a
debtor-in-possession under the jurisdiction and the orders of
the Bankruptcy Court.
In conjunction with its Chapter 11 Filing, the Predecessor
Company secured a $15.0 million debtor-in-possession (the
DIP) credit facility from affiliates of certain principal
holders of the Predecessor Company's payment-in-kind
securities issued in the summer of 2000.
On February 4, 2003, the Office of the U.S. Trustee
for the District of Delaware appointed an official committee of
unsecured creditors in the Bankruptcy Case (the Creditors
Committee).
On March 18, 2003, upon application of the American Stock
Exchange (AMEX), the Securities and Exchange Commission struck
the Predecessor Company's common stock and other securities
from listing and registration on the AMEX.
On March 27, 2003, the Predecessor Company filed with the
Bankruptcy Court a Plan of Reorganization (the Plan) and a
Disclosure Statement Accompanying Plan of Reorganization (the
Disclosure Statement). Immediately prior to the filing of its
Plan and Disclosure Statement, the Company also filed a motion
(the Bidding Procedures Motion) with the Bankruptcy Court
seeking approval of bidding procedures with respect to the
solicitation and selection of a transaction contemplating either
(i) the sale of capital stock of the Company to be
effective and funded upon the confirmation and effectiveness of
the Plan (an Exit Equity Transaction) or (ii) the sale, as
a going concern, of all or substantially all of the assets of
the Company to be effective and funded upon the confirmation and
effectiveness of the Plan (an Asset Sale Transaction, together
with an Exit Equity Transaction, referred to herein as a
Liquidity Transaction).
On July 22, 2003, the Predecessor Company executed an
Agreement and Plan of Merger (Merger Agreement) with FEBC,
pursuant to which FEBC would acquire 100% of the common stock of
the Company upon emergence from the Chapter 11 bankruptcy
proceeding. Pursuant to the Merger Agreement, FEBC would pay the
Company $76.0 million of merger consideration, which may be
adjusted downward in certain circumstances. FEBC would be
capitalized with $76.0 million including (i) a
$15.0 million senior loan to FEBC from an affiliate of
Fortress Investment Trust II LLC (Fortress), a private
equity fund, and (ii) $61.0 million of aggregate
equity contributions. Fortress would provide approximately 75%
of the equity investment to FEBC and would be entitled to
appoint a majority of the directors of the Successor Company
Alterra Healthcare Corporation (hereafter referred to as the
Successor Company). Emeritus Corporation and NW Select LLC would
provide the remaining equity capital to FEBC and would each be
entitled to appoint one director. The merger consideration would
be used (i) to fund costs of the Company's bankruptcy
and reorganization and
F-80
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
to provide for the working capital and other cash needs of the
Successor Company and (ii) to fund a distribution to the
unsecured creditors. In connection with the execution of the
Merger Agreement, Emeritus and Fortress delivered a Payment
Guaranty to the Successor Company pursuant to which Emeritus and
Fortress guaranteed up to $6.9 million and
$69.1 million, respectively, of the merger consideration.
On July 23, 2003, the Predecessor Company presented
FEBC's Merger proposal as the winning bid at a Bankruptcy
Court hearing in accordance with the court-approved bidding
procedures. Following the hearing, the Bankruptcy Court entered
an order authorizing the Predecessor Company to execute the
Merger Agreement and approving the proposed Merger as the
highest and best bid at the auction conducted by the Predecessor
Company on July 17, 2003.
The Predecessor Company filed an Amended Plan of Reorganization
and an Amended Disclosure Statement with the Bankruptcy Court to
incorporate the terms and conditions of the Merger. The Amended
Disclosure Statement, voting procedures, solicitation package,
and ballot forms were approved by the Bankruptcy Court on
September 15, 2003. Ballots were mailed September 20,
2003, to those eligible to vote on the amended plan of
reorganization. The deadline to return ballots was
October 17, 2003, although the Predecessor Company
requested permission from the Bankruptcy Court to accept ballots
and changed ballots submitted subsequent to the original voting
deadline.
On November 26, 2003, the Bankruptcy Court entered an order
confirming the Predecessor Company's Second Amended Plan of
Reorganization. The Successor Company emerged on
December 4, 2003 (the Effective Date).
Pursuant to the Merger Agreement, the maximum distribution to
holders of unsecured claims is approximately $23 million
(which includes payments pursuant to settlement agreements with
holders of deficiency claims), which was to be adjusted pursuant
to the Merger Agreement based on working capital and the cash
requirements of the Plan through the Effective Date. Certain
liabilities deemed subject to compromise may have been
subsequently repaid by the Successor Company, pursuant to the
Plan. The following liabilities deemed subject to compromise
were eliminated as of the Effective Date of the Successor
Company's emergence (in thousands):
Accounts payable
$
7,319
General liability insurance reserve
13,860
Accrued interest on convertible
    debt and notes payable
24,202
Guaranty liability
58,500
Notes payable
16,008
Short-term notes payable
420
Payment-in-kind debentures
253,892
Original debentures
187,248
Mortgage payable and accrued
    interest
54,682
Redeemable preferred stock
6,226
Total liabilities subject to
    compromise
$
622,357
F-81
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
The aggregate net costs resulting from reorganization of the
business have been reported in the Consolidated Statements of
Operations separately as reorganization items. For the eleven
months ended November 30, 2003, the following
reorganization items were incurred (in thousands):
Legal and consulting fees
$
13,899
Lender settlements
9,401
Accrued employee retention plan
    costs
2,967
Bankruptcy administration costs
2,430
Total
$
28,697
(2)
Fresh Start Accounting
On the Effective Date, the Successor Company adopted fresh start
accounting pursuant to the guidance provided by the American
Institute of Certified Public Accountant's Statement of
Position (SOP) 90-7,
Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code.
For financial
reporting purposes, the Successor Company adopted the provisions
of fresh start accounting effective December 1, 2003. In
accordance with the principles of fresh start accounting, the
Successor Company has adjusted its assets and liabilities to
their "fair values" as of December 1, 2003. The
Successor Company's reorganization value was determined to
be equal to the cash amount paid for all of the outstanding
common stock of the Successor Company plus the post emergence
liabilities existing at the reorganization date. To the extent
the fair value of its tangible and identifiable intangible
assets net of liabilities exceeded the reorganization value, the
excess was recorded as a reduction of the amounts allocated to
property and equipment. The net effect of all fresh start
accounting adjustments resulted in an expense of
$39.4 million, which is reflected in the Predecessor
Company's financial results for the 11 months ended
November 30, 2003.
The amounts recorded in the consolidated balance sheet of the
Predecessor Company were materially changed with the
implementation of fresh start accounting. Consequently, the
consolidated balance sheet of the Successor Company is not
comparable to that of the Predecessor Company, principally due
to the adjustment of property and equipment, deferred financing
costs, deferred gains, supply inventory, goodwill, long-term
debt, discharge of liabilities subject to compromise, and the
recapitalization of the Successor Company.
F-82
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
The effects of the application of fresh start accounting on the
Predecessor Company's preconfirmation Condensed
Consolidated Balance Sheet are as follows:
ALTERRA HEALTHCARE CORPORATION
REORGANIZED CONDENSED CONSOLIDATED BALANCE SHEET
December 1, 2003
(In thousands)
Predecessor
Successor
Company
Company
November 30,
Debt
New
Fresh start
December 1,
2003
discharge
capital
adjustments
2003
Assets
Current assets:
Cash and cash equivalents
$
11,925
—
76,000
(b)
(29,953
)(b)
57,972
Accounts receivable, net
8,014
—
—
—
8,014
Assets held for sale
30,683
—
—
21,854
(c)
52,537
Prepaid expenses and supply
    inventory
24,679
—
—
(9,233
)(d)
15,446
Other current assets
8,919
—
—
(38
)(e)
8,881
Total current assets
84,220
—
76,000
(17,370
)
142,850
Property and equipment, net
385,232
—
—
7,066
392,298
Goodwill, net
32,257
—
—
(32,257
)(g)
—
Other assets
36,020
—
—
(18,464
)(h)
17,556
Total assets
$
537,729
—
76,000
(61,025
)
552,704
Liabilities and
    Stockholders' Equity
Current liabilities:
Current installments of long-term
    obligations
$
207,027
—
—
(138,076
)(i)
68,951
Current debt maturities on assets
    held for sale
27,157
—
—
22,057
(i)
49,214
Short-term notes payable
4,595
—
—
(4,595
)(j)
—
Accounts payable
4,763
—
—
117
(e)
4,880
Accrued expenses
86,593
—
—
(11,816
)(k)
74,777
Other liabilities
12,381
—
—
—
12,381
Total current liabilities
342,516
—
—
(132,313
)
210,203
Long-term obligations, less current
    installments
152,950
—
—
111,306
(i)
264,256
Other long-term liabilities
2,900
—
—
(655
)(e)
2,245
Liabilities subject to compromise
622,357
(622,357
)(a)
—
—
—
Total liabilities
1,120,723
(622,357
)
—
(21,662
)
476,704
Stockholders' equity (deficit)
(582,994
)
622,357
76,000
(b)
(39,363
)
76,000
Total liabilities and
    stockholders' equity
$
537,729
—
76,000
(61,025
)
552,704
F-83
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
Adjustments reflected in the Reorganized Condensed Consolidated
Balance Sheet are as follows:
(a)  Liabilities subject to compromise are eliminated in
accordance with the confirmed Plan.
(b)  Cash activity includes receipt of $76.0 million
of merger proceeds from FEBC reduced by repayment of the
$14.9 million DIP credit facility and lender settlements in
accordance with the confirmed Plan.
(c)  Assets held for sale are adjusted to reflect their
estimated fair value and include reclassifications from property
and equipment to include those assets pending disposition in
accordance with the confirmed Plan.
(d)  Supply inventory is adjusted to reflect the Successor
Company's accounting policy.
(e)  Other assets and liabilities and accounts payable have
been adjusted to reflect their estimated fair value.
(f)  Net property and equipment have been adjusted to
reflect their estimated fair value, reduced by negative
reorganization value, and include reclassifications of assets
held for sale.
(g)  Goodwill has been eliminated pursuant to fresh start
accounting.
(h)  Deferred financing and lease costs and deferred loss
on sale/leaseback were eliminated in accordance with the
confirmed Plan.
(i)  Current installments of long-term obligations, current
debt maturities on assets held for sale, and long-term
obligations have been adjusted to reflect their estimated fair
value and have been reclassified to reflect appropriate
classifications as of December 1, 2003. Additionally, in
accordance with the confirmed Plan, the $14.9 million DIP
credit facility was repaid and $10.1 million of notes
payable were issued to replace the $9.4 million reserve for
JV settlements discussed below in (k).
(j)  Short-term notes payable were repaid with a portion of
the merger proceeds in accordance with the confirmed Plan.
(k)  Adjustments to accrued expenses include the repayment
of lender settlements from the Merger proceeds and the
replacement of the $9.4 million JV settlement reserve with
$10.1 million of notes payable as discussed in
(i) above in accordance with the confirmed Plan, offset by
certain accruals required for bankruptcy administration costs.
(3)
Summary of Significant Accounting Policies
(a)
Business
Alterra Healthcare Corporation develops, owns and operates
assisted living residences. As of December 31, 2002, the
Company operated and managed 332 residences located throughout
the United States with approximate capacity to accommodate
15,300 residents.
(b)
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. Results of
operations of the majority-owned subsidiaries are included from
the date of acquisition. All significant intercompany balances
and transactions with such subsidiaries have been eliminated in
the consolidation. Investments in other affiliated companies in
which the Company has a minority ownership position are
accounted for on the equity method.
F-84
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
(c)
Use of Estimates
The Company's financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America. These accounting principles require
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results may differ from
those estimates.
(d)
Recent Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board
(FASB) issued Interpretation No. 45,
Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness to Others, an interpretation
of FASB Statements No. 5, 57, and 107 and a rescission of
FASB Interpretation No. 34
. This Interpretation
elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations
under guarantees issued. The Interpretation also clarifies that
a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation
undertaken. The initial recognition and measurement provisions
of the Interpretation are applicable to guarantees issued or
modified after December 31, 2002 and application has not
had a material effect on the Company's financial statements.
In December 2003, the FASB issued a revised Interpretation
No. 46 (FIN 46R),
Consolidation of Variable
Interest Entities.
This interpretation provides guidance on
how to identify a variable interest entity (VIE) and
determine when the assets, liabilities, noncontrolling
interests, and results of operations of a VIE need to be
included in a company's financial statements if it meets
certain criteria as defined in the interpretation. A company
that holds variable interests in an entity will need to
consolidate the entity if the company's interest in the VIE
is such that the company will absorb a majority of the
VIE's losses and/or receive a majority of the entity's
expected residual returns, if they occur. FIN 46R also
requires additional disclosures by primary beneficiaries and
other significant variable interest holders. FIN 46R is
effective immediately for interests in an entity subject to this
interpretation created after December 31, 2003; otherwise,
this interpretation is to be applied by the beginning of the
first annual period beginning after December 31, 2004. The
Corporation early adopted FIN 46R on September 30,
2003. Adoption did not have a material affect on the
consolidated financial statements.
(e)
Cash Equivalents
The Company considers all highly liquid investments with
original maturities of less than ninety days to be cash
equivalents for purposes of the consolidated financial
statements.
(f)
Supply Inventory
The Successor Company adopted a policy to expense supply
inventory in the period in which the purchases are made. The
Predecessor Company capitalized supply inventory associated with
newly opened residences. In accordance with the confirmed Plan,
all supply inventory was eliminated through fresh start
accounting. The Company believes expensing supplies will not
materially affect results of operations in future periods.
F-85
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
(g)
Long-lived Assets
Property and equipment are stated at historical cost net of
accumulated depreciation for the Predecessor Company. Property
and equipment under capital leases are stated at the present
value of minimum lease payments. Depreciation is computed over
the estimated useful lives of the assets using the straight-line
method. Buildings and improvements are depreciated over
40 years, leasehold improvements over 13 years, and
furniture, fixtures, and equipment are depreciated over 3 to
7 years. Maintenance and repairs are expensed as incurred.
The carrying value of residences owned and operated under
capital leases are periodically evaluated for impairment on the
established undiscounted cash flows including the residual value
of the properties. An impairment loss is recognized when the
present value of estimated cash flows, including the estimated
residual value, is less than the carrying amount.
Goodwill of the Company represented the costs of acquired net
assets in excess of their fair market values. The Company
adopted the provisions of SFAS No. 142,
Goodwill
and Other Intangible Assets
, as of January 1, 2002.
Goodwill and intangible assets acquired in a purchase business
combination and determined to have an indefinite useful life are
not amortized, but instead tested for impairment at least
annually in accordance with the provisions of
SFAS No. 142. SFAS No. 142 also requires
that intangible assets with estimable useful lives be amortized
over their respective estimated useful lives, and reviewed for
impairment in accordance with SFAS No. 144,
Accounting for Impairment or Disposal of Long-Lived
Assets.
Under the transitional provisions of SFAS No. 142, the
Company identified its reporting units and performed impairment
tests on the net goodwill associated with each of these
reporting units. The fair value of the owned reporting units was
determined by estimating the terminal value of the future cash
flows. The fair value of the leased reporting units was
determined by estimating the present value of the cash flows for
the life of the lease. Based on this impairment testing, the
Company recorded an impairment loss of $54.7 million in the
first quarter of 2002, of which $8.8 million is associated
and reported with those residences classified as discontinued
operations. The impairment loss has been recorded as a
cumulative effect of change in accounting principle and as loss
on discontinued operations in the accompanying consolidated
statements of operations for the year ended December 31,
2002. As of December 31, 2002, the Company performed its
annual impairment test required by the provisions of
SFAS No. 142 and an additional impairment loss of
$9.5 million was identified based on revised cash flow
projections. The $9.5 million annual impairment loss has
been recorded in other expenses in the accompanying consolidated
statements of operations for the year ended December 31,
2002. As of November 30, 2003, the Company had recorded
$32.2 million of goodwill. In accordance with fresh start
accounting principles, the Predecessor Company's goodwill
was eliminated effective December 1, 2003.
(h)
Assets Held For Sale
Property and equipment held for sale are carried at the lower of
cost or estimated fair value less costs to sell. Depreciation
and amortization are suspended during the period the assets are
classified as held for sale.
(i)
Deferred Financing Costs
Financing costs related to the issuance of debt are capitalized
and included in other assets and are amortized to interest
expense using the effective-interest method over the term of the
related
F-86
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
debt. As of December 1, 2003, approximately
$15.4 million of net deferred financing costs have been
eliminated through fresh start accounting.
(j)
Revenue
Resident service fees including move-in fees are recognized when
services are rendered and are reported at net realizable
amounts. Management fees are recognized in the month in which
services are performed based on the terms of the management
agreements in place for managed residences owned by third
parties and, for the Predecessor Company only, those operated
under unconsolidated joint venture arrangements. Management fees
are generally earned based on a percentage of the
residence's revenues.
Miscellaneous revenue includes fees from the beauty shop,
pharmacy, incontinence care program, and vending machine revenue.
(k)
Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the expected future tax consequences attributable to temporary
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that
includes the enactment date. When it has been determined that it
is more likely than not that a deferred tax asset will not be
realized, a valuation allowance is established.
(l)
Stock Options
For financial reporting purposes, the Predecessor Company
applied the intrinsic value method of APB Opinion No. 25 in
accounting for stock options and, accordingly, compensation cost
has been recognized only for stock options granted below fair
market value. Had the Predecessor Company determined
compensation cost based on the fair value method prescribed by
SFAS No. 123 the Predecessor Company's net income
would have decreased or net loss would have increased as follows
(in thousands):
11 Months Ended
Year Ended
November 30, 2003
December 31, 2002
Net income (loss) as reported
$
488,928
(222,002
)
Compensation expense under the fair
    value based method
(37
)
(40
)
Proforma net income (loss)
$
488,891
(222,042
)
There were no options granted in 2003 or 2002.
(m)     Reclassifications
Certain reclassifications have been made to the 2002 financial
statements to conform to the 2003 presentation.
F-87
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
(4)
Joint Venture Activity
The Predecessor Company entered into the following joint venture
settlements during 2002:
•
In January 2002 the Company closed on the buyout of joint
    venture partner interests in one residence with an aggregate
    capacity of 42 residents in connection with a modification and
    settlement agreement with one investor group. The Company paid
    $600,000 in consideration for these acquired interests.
•
In October 2002 the Company closed on the buyout of joint
    venture partner interests in one residence with an aggregate
    capacity of 40 residents. In consideration for the acquired
    interests the Company paid $800,000 in cash and issued a
    $1.0 million note.
•
In December 2002 the Company entered into an agreement with one
    joint venture partner pursuant to which the Company agreed to
    purchase all the remaining joint venture interests not held by
    the Company in eight residences and to acquire promissory notes
    previously issued by the Company aggregating approximately
    $3.6 million in exchange for the issuance of a five year
    promissory note for $7.2 million from the Company. This
    settlement was effective with the Plan confirmation and the
    consummation of the merger.
The Company entered into the following joint venture settlements
during 2003:
•
In October 2003 the Company entered into an agreement with the
    Company's remaining joint venture partner group pursuant to
    which the Company agreed to purchase all of the remaining joint
    venture interests not held by the Company in 32 residences and
    to secure the release of the Company with respect to all claims
    held by these joint venture partners. Pursuant to this
    settlement agreement approved by the Court, the limited partners
    are entitled to receive from the Company an aggregate of
    $2.9 million of five-year promissory notes. This settlement
    was effective with the Plan confirmation and consummation of the
    merger.
(5)
Assets Held for Sale
The Predecessor Company previously adopted a plan to dispose of
or terminate leases on 143 residences with an aggregate capacity
of 6,499 residents and 33 parcels of land. Residences included
in the disposition plan were identified based on an assessment
of a variety of factors, including geographic location,
residence size, operating performance, and creditor negotiations.
The Predecessor Company has recorded an impairment loss on its
properties held for sale whenever their carrying value cannot be
fully recovered through the estimated cash flows, including net
sale proceeds. The amount of the impairment loss recognized is
the difference between the residence's carrying value and
the residence's estimated fair value less costs to sell.
The Company's policy is to consider a residence to be held
for sale when the Company has committed to a plan to sell such
residence and active marketing activity has commenced or it is
expected to commence in the near term. During the year ended
December 31, 2002, the Predecessor Company recognized an
impairment loss of $12.9 million and reclassified as held
for sale 19 residences included as part of executed deed in lieu
restructuring agreements and six leased residences with pending
sales. The impairment loss and revenues and expenses of those
residences classified as held for sale subsequent to
January 1, 2002 have been recorded as discontinued
operations in the consolidated statements of operations.
F-88
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
As of November 30, 2003, 21 residences and five land
parcels are held for sale. Assets held for sale principally
comprises current assets and liabilities and net property and
equipment. The corresponding mortgage liability is recorded in
current debt maturities on assets held for sale. The Company
expects to sell these residences and land parcels within twelve
months of the date they are designated as held for sale.
The following table represents condensed operating information
included in the loss on discontinued operations of the
Consolidated Statements of Operations of the Company (in
thousands):
11 Months Ended
Fiscal Year Ended
November 30, 2003
December 31, 2002
Operating loss
$
(1,824
)
(8,559
)
Impairment charges
(5,213
)
(12,942
)
Guaranty liability
—
(58,500
)
Net asset write off of former
    subsidiary
—
(24,060
)
Gain (loss) on debt extinguishment
—
5,954
Loss on sale or disposal of
    residences
(25,896
)
(9,826
)
Cumulative effect of change in
    accounting principle
—
(8,829
)
Loss on discontinued operations
$
(32,933
)
(116,762
)
There are a number of factors that may affect the timing of a
sale and the sale price that will ultimately be achieved for
these residences, including, among other things, the following:
potential increased competition from any other assisted living
residences in the area, the relative attractiveness of assisted
living residences for investment purposes, interest rates, the
actual operations of the residence, and the ability to retain
existing residents and attract new residents. As a result, there
is no assurance as to what price will ultimately be obtained
upon a sale of these residences or the timing of such a sale.
The estimated fair value of the assets held for sale is
reflected in current assets and the outstanding debt related to
the assets held for sale is reflected in current liabilities on
the consolidated balance sheets.
(6)
Property and Equipment
As of December 31, 2002, property and equipment comprises
the following (in thousands):
2002
Land and improvements
$
61,490
Buildings and leasehold improvements
444,880
Furniture, fixtures, and equipment
88,457
Total property and equipment
594,827
Less accumulated depreciation and
    amortization
(102,702
)
Property and equipment, net
$
492,125
At December 31, 2002, property and equipment includes
$88.3 million of buildings and improvements held under
capital and financing leases. The related accumulated
amortization totaled $8.7 million at December 31, 2002.
F-89
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
(7)
Unconsolidated Affiliates and Managed Residences
The Company managed certain residences operated by joint
ventures in which it either had no ownership or a minority
ownership position, typically less than 10%. As of
December 31, 2002, the Company owned minority equity
interests in entities owning or leasing (and also managed) 18
residences. Substantially all the earnings of these
unconsolidated residences are included in the consolidated
statements of operations. Effective September 30, 2003, the
Predecessor Company early adopted FASB Interpretation
No. 46,
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51
, and based on an
evaluation of the Company's unconsolidated joint ventures,
the residences operating under those joint ventures have been
consolidated. Included in other current assets of the
Company's balance sheet are net investment in and advances
to affiliates of $1.7 million as of December 31, 2002.
The results of operations of these unconsolidated and managed
residences operating under joint venture arrangements for
11 months ended November 30, 2003 and 2002 are as
follows (in thousands):
11 Months Ended
Fiscal Year Ended
November 30, 2003
December 31, 2002
Resident service fees
$
14,872
41,586
Residence operation expenses
10,800
30,337
Residence profit
4,072
11,249
Management fee expense
704
2,311
Financing expense
3,603
8,338
(Loss) income before tax
$
(235
)
600
Financing expense on these residences includes $3.8 million
and $13.8 million of lease and mortgage expense in 2003 and
2002 respectively, which represents lease income to the Company
from these residences through September 30, 2003.
The Company also manages certain other residences, including
residences managed as a result of the transfer of title to all
the stock of its subsidiary to a third party. As of
November 30, 2003 and 2002, the Company managed 17 and 29
residences, respectively.
(8)
Restricted Cash and Investments
Restricted cash and investments consist of debt service reserves
with interest rates ranging from 1% to 3% and maturities ranging
from one to twelve months.
(9)
Goodwill
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards
(SFAS) No. 142, "Goodwill and Other Intangible
Assets," having a required effective date for fiscal years
beginning after December 15, 2001. Under
SFAS No. 142, goodwill and other intangible assets
deemed to have indefinite lives are no longer amortized but will
be subject to annual impairment tests in accordance with the
Statement. Other intangible assets will continue to be amortized
over their useful lives. The Company adopted
SFAS No. 142 effective January 1, 2002.
F-90
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
Supplemental comparative disclosure as if the change had been
retroactively applied to the prior period is as follows (in
thousands):
11 Months
Fiscal Year
Ended
Ended
November 30,
December 31,
2003
2002
Reported income (loss) from
    continuing operations before cumulative effect of change in
    accounting principle
$
521,861
(59,374
)
Add: Goodwill amortization
—
—
Adjusted net income (loss) from
    continuing operations before cumulative effect of change in
    accounting principle
$
521,861
(59,374
)
(10)
Other Assets
Other assets comprises the following at December 31, 2002
(in thousands):
2002
Deferred financing costs, net
$
18,710
Lease security deposits
7,443
Deposits and other
7,356
Total other assets
$
33,509
F-91
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
(11)
Long-term Debt, Capital Leases, Redeemable Preferred Stock,
    and Financing Obligations
Long-term debt, redeemable preferred stock, capital leases, and
financing obligations comprises the following at
December 31, 2002 (in thousands):
2002
5.25% convertible subordinated
    debentures due December 15, 2002, originally callable by
    the Company on or after December 31, 2000
$
112,043
7.00% convertible subordinated
    debentures due June 1, 2004, originally callable by the
    Company on or after June 15, 2000
40,355
6.75% convertible subordinated
    debentures due June 30, 2006, originally callable by the
    Company on or after July 15, 2000
34,850
9.75% Series A convertible
    debentures due May 31, 2007, originally callable by the
    Company on or after May 31, 2003
42,500
9.75% Series B convertible
    debentures due May 31, 2007, originally callable by the
    Company on or after May 31, 2003
155,167
9.75% Series C convertible
    debentures due May 31, 2007, originally callable by the
    Company on or after May 31, 2003
54,762
Total convertible debt
439,677
Mortgages payable, due from 2004
    through 2037; weighted average interest rate of 6.46%
131,719
Capital and financing lease
    obligation payable through 2020; weighted average interest rate
    of 11.48%
76,967
Serial and term revenue bonds
    maturing serially from 2003 through 2013; interest rate of 7.34%
3,405
Notes payable to former joint
    venture partners through 2008; interest rates of 9.0%
15,286
Capital leases, financing
    obligations and mortgage payable in default and subject to
    acceleration; interest rates from 4.35% to 8.0%
306,253
Total long-term obligations
973,307
Less current installments and debt
    maturities on assets held for sale
801,797
Total long-term obligations, less
    current installments
$
171,510
Certain of the Company's debt agreements require the
Company to maintain financial ratios, including a debt service
coverage ratio and occupancy ratio. As of November 30, 2003
the Company had obtained waivers for all past defaults.
As of December 31, 2002, the Company was in violation of
various covenants with several of its credit facilities. As the
Company's principal credit, lease, and other financing
facilities were cross-defaulted to a material default occurring
under other credit, lease, or financing facilities, a payment
default by the Company under one such facility resulted in the
Company being in default under other such facilities.
Obligations in the amount of $306.2 million were classified
as current liabilities at December 31, 2002 because the
applicable lenders had the right to accelerate their loans due
to the existence of a default.
The Mortgages payable are collateralized by security agreements
on property and equipment guarantees by the Company. In
addition, certain security agreements require the Company to
F-92
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
maintain collateral and debt reserve funds. These funds are
recorded as restricted cash and long-term investments.
The Company leases property and equipment with net book values
of $88.3 million at December 31, 2002, through various
capital and financing leases. See note 18 for further
information.
Unsecured notes payable outstanding to former joint venture
partners total $15.3 million at December 31, 2002. See
note 4 for further information.
In 2000, the Company completed a financing transaction in which
it issued $173.0 million of convertible debentures and
convertible preferred shares to several investors, including
affiliates of the Company. The securities issued were initially
convertible at $4.00 per share, bear a 9.75% semi-annual
payment-in-kind (PIK) coupon or dividend, and have a
seven-year maturity. The Company could call the securities at
any time after three years if the trading price of the
Company's Common Stock averaged at least $8.00 for the
preceding 30 trading days. This initial closing contemplated
that the Company had the option to issue up to an additional
$29.9 million of these debentures within 180 days
following the May 31, 2000 closing. The Company recorded a
gain on the early extinguishment of debt of $8.5 million
related to its retirement of $41.4 million of convertible
debt in the initial closing. On August 10, 2000, the
Company exercised its option to issue the additional
$29.9 million of securities, thereby increasing the overall
financing transaction to a total of $203.0 million (the
May 31, 2000 and August 10, 2000 closings are referred
to together as the 2000 Equity-Linked Transaction). The
securities issued in this transaction include the following:
(a)
Series A Stock
1,250,000 shares of the Series A Stock were sold for
the stated value, $4.00 per share, representing aggregate
proceeds of $5 million.
(b)
Series A Debentures
The $42.5 million original aggregate principal amount of
9.75% Series A convertible pay-in-kind debentures due
May 31, 2007 bore PIK interest at 9.75% per annum
payable semi-annually in the form of additional Series B
debentures on January 1 and July 1 of each year.
(c)
Series B Debentures
The $112.6 million original aggregate principal amount of
9.75% Series B convertible pay-in-kind debentures due
May 31, 2007 bore PIK interest at 9.75% per annum
payable semi annually in the form of additional Series B
debentures on January 1 and July 1 of each year.
(d)
Series C Debentures
The $42.8 million original aggregate principal amount of
9.75% Series C convertible pay-in-kind debentures due
May 31, 2007 bore PIK interest at 9.75% per annum
payable semi-annually in the form of additional Series C
debentures on January 1 and July 1 of each year.
(12)
Short-term Notes Payable
In 2001, the Predecessor Company obtained a $7.5 million
Bridge Loan that had an initial six-month term, was secured by
first mortgages on several residences, and originally bore
interest at an escalating interest rate, commencing at
10% per annum. At the Company's election, the Bridge
Loan
F-93
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
was extended by an additional six months whereupon the Bridge
Loan became convertible into convertible subordinated debentures
of the Company having rights and terms substantially similar to
the Series B 9.75% pay-in-kind convertible debentures, but
having a conversion price equal to $75 per share of
Series B preferred stock (a Common Stock equivalent price
of $0.75 per share). The bridge lenders were entitled to
participate in any transaction involving the issuance by the
Company of equity or equity-linked securities during the term of
the Bridge Loan. Effective March 1, 2002, the Company
entered into an amendment with the bridge lenders that fixed the
interest rate on the Bridge Loan at 9.0% per annum and
extended the maturity date for the Bridge Loan to
January 5, 2003.
(13)
Accrued Expenses
Accrued expenses comprise the following at December 31,
2002 (in thousands):
2002
Accrued salaries and wages
$
13,520
Accrued interest
30,440
General liability insurance reserve
20,098
Accrued property taxes
6,373
Accrued vacation
4,751
Accrued workers compensation expense
955
Reserve for loss on joint venture
    settlements
9,407
Accrued professional fees related
    to bankruptcy administration
766
Other
5,841
Total accrued expenses
$
92,151
The Company is self-insured or retains a portion of the exposure
for losses related to workers compensation, healthcare benefits,
and general liability costs. The reserves as of
December 31, 2002 are based on claims filed and an
actuarial estimate of expected losses.
(14)
Stockholders' Equity
On December 10, 1998, the Company entered into a Rights
Agreement with American Stock Transfer & Trust Company,
as Rights Agent, pursuant to which it declared and paid a
dividend of one preferred share purchase right (a Right) for
each outstanding share of Common Stock. Each Right entitles the
registered holder to purchase from the Company one one-hundredth
of a share of Series A Junior Participating Preferred
Stock, $0.01 par value per share (the Preferred Shares), of
the Company at a price of $130.00 per one one-hundredth of
a Preferred Share.
(15)
Stock Options
Stock options are granted with an exercise price equal to the
stock's fair market value at the date of grant. Generally,
stock options had 10-year terms, vested 25% per year, and
would become fully exercisable after four years from the date of
grant. At December 31, 2002, 1,371,460 shares were
available for grant under the Stock Option Plan. There were no
options granted or exercised during 2003.
F-94
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
Stock option activity during the years ended December 31,
2002 was as follows:
Number
Weighted Average
of shares
Exercise Price
Balance at December 31, 2000
965,187
$
12.65
Granted
1,000,000
1.31
Exercised
—
—
Forfeited
267,170
14.06
Balance at December 31, 2001
1,698,017
5.75
Granted
—
—
Exercised
—
—
Forfeited
569,477
1.31
Balance at December 31, 2002
1,128,540
$
7.04
Stock options outstanding at December 31, 2002 are as
follows:
Number
Average
Number
Range of
Outstanding at
Remaining
Weighted
Exercisable at
Weighted
Exercise
December 31,
Contractual
Average
December 31,
Average
Prices
2002
Life
Price
2002
Price
$ 0.09 -  1.40
501,229
6.0
$
1.31
167,896
$
1.30
1.40 -  8.69
354,313
4.2
5.80
324,249
5.81
8.70 - 17.94
55,807
4.4
15.66
55,807
15.66
17.95 - 20.81
190,895
6.0
18.80
189,517
18.81
20.82 - 29.56
26,296
5.3
29.34
26,296
29.34
Total
1,128,540
5.2
$
7.04
763,765
$
9.57
F-95
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
(16)
Income Taxes
The components of the provision for income taxes for the period
ended November 30, 2003 and year ended December 31,
2002, are as follows (in thousands):
11 Months
Fiscal Year
Ended
Ended
November 30,
December 31,
2003
2002
Income tax expense (benefit):
Current:
Federal
$
—
$
—
State
119
100
Total current
119
100
Deferred:
Federal
—
—
State
—
—
Total deferred
—
—
Total
$
119
$
100
Deferred tax assets and liabilities consist of the following at
December 31, 2002 (in thousands):
2002
Deferred tax assets:
Net operating loss carryforwards
$
163,566
Development write-off
2,250
Building reserve
27,352
Accrued expenses
12,593
Investment in unconsolidated
    affiliates
1,017
Loss contingency
22,815
Other
741
Total deferred tax assets
230,334
Less valuation allowance
(218,899
)
Deferred tax assets, net of
    valuation allowance
$
11,435
Deferred tax liabilities:
Property and equipment
$
4,550
Deferred gain on sale/leaseback
5,170
Other
1,715
Deferred tax liabilities
$
11,435
During 2000, a valuation allowance was established because the
    Company was uncertain that such deferred tax assets in excess of
    the applicable reversing deferred tax liabilities would be
    realized in future years. The valuation allowance established to
    reduce deferred tax assets as of December 31, 2002 was
    $218.9 million. In assessing the realizability of deferred
    tax assets, management considers whether it is more likely than
    not that some portion of all of the deferred tax assets will not
    be realized. The ultimate realization of deferred tax assets is
F-96
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
dependent upon the generation of future taxable income during
    the periods in which those temporary differences become
    deductible. Management considers the scheduled reversal of
    deferred tax liabilities, projected future taxable income, and
    tax planning strategies in making this assessment.
The effective tax rate on income before income taxes varies from
the statutory Federal income tax rate as follows:
11 Months
Fiscal Year
Ended
Ended
November 30,
December 31,
2003
2002
Statutory rate
35.0
%
35.0
%
State taxes, net
4.0
4.0
Valuation allowance
(59.4
)
(25.9
)
PIK interest
—
(4.1
)
Stock transfer
23.6
(7.1
)
Other
(3.3
)
(1.9
)
Effective rate
(0.1
)%
0.0
%
The Company has approximately $419.4 million of regular net
operating loss carryforwards at December 31, 2002. Any
unused net operating loss carryforwards will expire commencing
in years 2007 through 2022. As a result of the emergence from
bankruptcy, the net operating loss carryforwards were reduced to
$116.6 million. These net operating loss carryforwards are
subject to limitations under Section 382 of the Internal
Revenue Code.
(17)
Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it
is practical to estimate that value:
(a)
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short
maturity of those instruments.
(b)
Restricted Cash
The carrying amount approximates fair value because of the short
maturity of the underlying investments. Restricted cash is
classified as such because it is restricted as collateral for
lease arrangements and debt service reserves.
F-97
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
(c)
Short-term Notes Payable, Mortgages Payable,
    Convertible Subordinated Debentures Payable
The carrying amount of short-term notes payable approximates
fair value because of the short maturity of those instruments.
The carrying amount of mortgages payable and financing
obligations approximates fair value because the stated interest
rates approximate fair value.
The fair value of the Company's convertible subordinated
debentures is estimated based on quoted market prices. At
December 31, 2002, the Company's convertible
subordinated debentures had a book value of $187.3 million.
(18)
Sale Leasebacks, Lease Commitments and Contingencies
Pursuant to the Merger Agreement, the maximum distribution to
holders of unsecured claims is approximately $23 million
(which includes payments pursuant to settlement agreements with
holders of deficiency claims), which will be adjusted pursuant
to the Merger Agreement based on working capital and the cash
requirements of the Plan through the Effective Date. Certain
creditors of the Company have filed requests for payment with
the Bankruptcy Court. Additionally, a number of administrative
claims have been filed with the Bankruptcy Court.
The Company has entered into sale/leaseback agreements with
certain REITs as a source of financing the development,
construction, and to a lesser extent, acquisitions of assisted
living residences. Under such agreements, the Company typically
sells to the REIT one or more residences at a negotiated value
and simultaneous with such sale, the Company enters into a lease
agreement for such residences. The initial terms of the leases
vary from 10 to 15 years and include aggregate renewal
options ranging from 15 to 30 years. The Company is
responsible for all operating costs, including repairs, property
taxes, and insurance. The annual minimum lease payments are
based upon a percentage of the negotiated sales value of each
residence. The residences sold in sale/leaseback transactions
typically are sold for an amount equal to or less than their
fair market value. The leases are accounted for as operating or
capital leases with any applicable gain or loss realized in the
initial sales transaction being deferred and amortized into
income in proportion to rental expense over the initial term of
the lease.
During 2002, the Company completed sale/leaseback transactions
accounted for as a financing of 12 residences with REITs for an
aggregate purchase price of $40.6 million. The proceeds of
this refinancing were used principally to retire mortgage loan
and accrued interest obligations.
In February 2003, the Company sold 25 residences,
extinguished the related debt, and leased back the facilities
under an operating lease. The Company also refinanced
$6.9 million of debt secured by six residences.
As of November 30, 2003, the Company had six
multi-residence portfolios leased from various REITs. These
portfolios include an aggregate of 225 residences with an
aggregate capacity of 9,609 beds. The Company has entered
into restructuring agreements with respect to five of these
leased portfolios, including amendments of certain lease
covenants and terms and, in three lease facilities, the
conversion of individual leases into single master leases. The
cash rent due under one
F-98
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
lease facility was modified through the application of various
deposits held by the landlord to satisfy a portion of the cash
rent obligation in the early years of the restructured master
lease.
The Company is required by certain REITs to obtain a letter of
credit as collateral for leased residences. Outstanding letters
of credit at November 30, 2003 and December 31, 2002
were $3.5 million.
In addition to leased residences, the Company leases certain
office space and equipment under noncancelable operating leases
with remaining initial terms of between 2 and 18 years.
Rental expense on all operating leases, including residences,
for the 11 month period ended November 30, 2003, and
the fiscal year ended December 31, 2002 was
$57.8 million, $58.7 million, respectively.
Future minimum lease payments for the next five years and
thereafter under noncancelable leases at November 30, 2003,
are as follows (in thousands):
Capital
Operating
2004
$
19,410
$
59,673
2005
7,728
59,243
2006
7,728
58,548
2007
7,728
55,951
2008
7,728
51,308
Thereafter
142,076
508,828
Total minimum lease payment
192,398
$
793,551
Less amount representing interest
115,431
Long-term capital lease obligations
$
76,967
The minimum lease payments presented are the base rents at the
initial term of the lease. The base rents may increase after the
initial year on certain leases by the increase in the consumer
price index and for other leases, as a percentage of increased
gross revenues of the leased residence, thus the amounts being
paid may be greater than the minimum lease payments.
From time to time, the Company is involved in various legal
proceedings relating to claims arising in the ordinary course of
its business. Neither the Company nor its subsidiaries is a
party to any legal proceeding, the outcome of which,
individually or in the aggregate, is expected to have a material
adverse affect on the Company's financial condition or
results of operations.
(19)
Subsequent Events
An additional nine residences and five land parcels were
designated as assets held for sale effective December 1,
2003. In the period from December 1, 2003 to
December 31, 2003, nine residences were sold or disposed of
and approximately $28.6 million in debt was repaid or was
assumed by the buyer.
In January 2004, the Company paid in full
$17.1 million of debt outstanding as of December 31,
2003 relating to seven residences.
F-99
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2003 and December 31, 2002
(In thousands)
In January 2004, the Company's Board of Directors
approved a plan to sell an additional 13 residences. These
properties are included in property and equipment at
December 31, 2003 and have a net book value of
$11.3 million. The estimated fair value of these properties
exceeds their carrying value.
The Company terminated five residence leases and sold one land
parcel subsequent to December 31, 2003. Additionally,
pursuant to a prior agreement with one of the Company's
lenders, two residences were foreclosed upon. There was no
significant gain or loss associated with these transactions.
F-100
PROSPECTUS
Shares
Common Stock
Brookdale Senior Living Inc.
Goldman, Sachs & Co.
Lehman Brothers
Until                     ,
2005 (25 days after the date of this prospectus) all dealers
that effect transactions in these securities, whether or not
participating in this offering may be required to deliver a
prospectus. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
,
2005.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution
The following table sets forth the estimated fees and expenses
payable by the registrant in connection with the distribution of
the common stock:
Securities and Exchange Commission
    registration fee
$
23,540
National Association of Securities
    Dealers, Inc. filing fee
$
20,500
NYSE listing fee
*
Printing and engraving costs
*
Legal fees and expenses
*
Accountants' fees and expenses
*
Blue sky qualification fees and
    expenses
*
Transfer agent fees
*
Miscellaneous
*
Total
$
*
*
To be furnished by amendment.
Item 14.
Indemnification of Directors and Officers
Section 102 of the Delaware General Corporation Law, as
amended, or the DGCL, allows a corporation to eliminate the
personal liability of directors to a corporation or its
stockholders for monetary damages for a breach of a fiduciary
duty as a director, except where the director breached his duty
of loyalty, failed to act in good faith, engaged in intentional
misconduct or knowingly violated a law, authorized the payment
of a dividend or approved a stock repurchase or redemption in
violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the DGCL provides, among other things, that
a corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (other than an action by or
in the right of the corporation) by reason of the fact that the
person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the corporation's
request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with the action,
suit or proceeding. The power to indemnify applies if
(i) such person is successful on the merits or otherwise in
defense of any action, suit or proceeding or (ii) such
person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The power to indemnify applies to actions brought by
or in the right of the corporation as well, but only to the
extent of defense expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably
incurred and not to any satisfaction of judgment or settlement
of the claim itself, and with the further limitation that in
such actions no indemnification shall be made in the event of
any adjudication of negligence or misconduct in the performance
of his duties to the corporation, unless a court believes that
in light of all the circumstances indemnification should apply.
Section 174 of the DGCL provides, among other things, that
a director who willfully and negligently approves of an unlawful
payment of dividends or an unlawful stock purchase or redemption
may be held liable for such actions. A director who was either
absent when the unlawful actions were approved or dissented at
the time, may avoid liability by causing his or her dissent to
such actions to be entered in the books containing the minutes
of the meetings of the board of
II-1
directors at the time the action occurred or immediately after
the absent director receives notice of the unlawful acts.
The Company's amended and restated certificate of
incorporation states that no director shall be liable to us or
any of our stockholders for monetary damages for breach of
fiduciary duty as director, except for breaches of the duty of
loyalty, and for acts or omissions in bad faith or involving
intentional misconduct or knowing violation of law. A director
is also not exempt from liability for any transaction from which
he or she derived an improper personal benefit, or for
violations of Section 174 of the DGCL. To the maximum
extent permitted under Section 145 of the DGCL, our amended
and restated certificate of incorporation authorizes us to
indemnify any and all persons whom we have the power to
indemnify under the law.
Our amended and restated by-laws provide that the Company will
indemnify, to the fullest extent permitted by the DGCL, each
person who was or is made a party or is threatened to be made a
party in any legal proceeding by reason of the fact that he or
she is or was a director or officer of the Company or a
subsidiary. However, such indemnification is permitted only if
such person acted in good faith, lawfully and not against our
best interests. Indemnification is authorized on a case-by-case
basis by (1) our board of directors by a majority vote of
disinterested directors, (2) a committee of the
disinterested directors, (3) independent legal counsel in a
written opinion if (1) and (2) are not available, or
if disinterested directors so direct, or (4) the
stockholders. Indemnification of former directors or officers
shall be determined by any person authorized to act on the
matter on our behalf. Expenses incurred by a director or officer
in defending against such legal proceedings are payable before
the final disposition of the action, provided that the director
or officer undertakes to repay us if it is later determined that
he or she is not entitled to indemnification.
Prior to completion of this offering, the Company intends to
enter into separate indemnification agreements with its
directors and officers. Each indemnification agreement will
provide, among other things, for indemnification to the fullest
extent permitted by law and our amended and restated certificate
of incorporation and amended and restated by-laws against any
and all expenses, judgments, fines, penalties and amounts paid
in settlement of any claim. The indemnification agreements will
provide for the advancement or payment of all expenses to the
indemnitee and for reimbursement to us if it is found that such
indemnitee is not entitled to such indemnification under
applicable law and our amended and restated certificate of
incorporation and amended and restated by-laws.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that, in the opinion
of the Commission, such indemnification is against public policy
as expressed in the Securities Act and is therefore
unenforceable.
We maintain directors' and officers' liability
insurance for our officers and directors.
Item 15.
Recent Sales of Unregistered Securities
The following is a summary of transactions by us involving sales
of our securities that were not registered under the Securities
Act during the last three years preceding the date of this
registration statement. Each of the following transactions were
private transactions entered into in connection with the
formation transactions described in "Business —
History" and were exempt from registration under the
Securities Act by virtue of the exemption provided under
Section 4(2) of the Securities Act. In  2005:
•
A wholly-owned subsidiary of ours merged with and into BLC. In
    the merger, the stockholders of BLC, including affiliates of
    Fortress, an affiliate of Capital Z Partners and certain
    members of our management, received an aggregate of
    20,000,000 shares of our common stock, representing 34.5%
    of our outstanding common stock prior to this offering, for
II-2
all of their outstanding common stock of BLC. As a result of the
    merger, BLC became our wholly-owned subsidiary.
•
Alterra purchased from Fortress Investment Trust II, an
    affiliate of Fortress, all of the outstanding membership
    interests of FIT REN, which had recently acquired certain senior
    living facilities from Prudential Financial, Inc., for an
    aggregate purchase price of approximately $282.4 million
    (including the assumption of approximately $171.0 million
    of debt). As a result of the purchase, FIT REN became a
    wholly-owned subsidiary of Alterra and Fortress Investment
    Trust II became a member of FEBC-ALT Investors LLC, or
    FEBC-ALT Investors, Alterra's indirect parent company. In
    connection with the merger of FEBC-ALT Investors described
    below, Fortress Investment Trust II received
    11,750,000 shares of our common stock, representing 20.3%
    of our outstanding common stock prior to this offering, for its
    interest in FIT REN.
•
A wholly-owned subsidiary of ours merged with and into FEBC-ALT
    Investors, Alterra's indirect parent company. In the
    merger, FIT-ALT Investor, Fortress Investment Trust II,
    Emeritus, NW Select and certain members of our management, each
    of which was a member of FEBC-ALT Investors, received an
    aggregate of 29,750,000 shares of our common stock,
    representing 51.3% of our outstanding common stock prior to this
    offering, for all of the outstanding membership interests of
    FEBC-ALT Investors. FIT-ALT Investor LLC is an affiliate of
    Fortress. As a result of the merger, Alterra became our
    wholly-owned subsidiary.
•
A wholly-owned subsidiary of ours merged with and into Fortress
    CCRC. In the merger, Fortress Investment Trust II received
    an aggregate of 8,250,000 shares of our common stock,
    representing 14.2% of our outstanding common stock prior to this
    offering, for all of the outstanding membership interests of
    Fortress CCRC. Fortress CCRC owns, through its wholly-owned
    subsidiaries, seven senior living facilities, including one
    facility currently under contract for sale. As a result of the
    merger, Fortress CCRC became our wholly-owned subsidiary.
In addition, on August 5, 2005, BLC granted 988 shares
of its stock and FEBC-ALT Investors granted 3.33% of its
membership interests, to certain members of our management,
which shares and percentage interests are subject to substantial
risk of forfeiture until the occurrence of certain events, as
specified in the applicable restricted stock or restricted
securities award agreements. In accordance with the terms of the
plans, a portion of these securities will no longer be subject
to a risk of forfeiture upon the consummation of this offering.
In addition, the remaining securities will vest over a five-year
period following the issuance if the executive remains
continuously employed by the Company. Securities that are
subject to a risk of forfeiture may not be sold or transferred.
See "Business — Equity Incentive
Plans — Employee Restricted Stock Plans." In
connection with the merger transactions described in above,
these shares were automatically converted into an aggregate of
2,577,652 shares of our common stock, representing 4.4% of
our outstanding common stock prior to this offering. These
grants were exempt from the registration requirements of the
Securities Act pursuant to Rule 701.
II-3
Item 16.
Exhibits and Financial Statement Schedules
A.
Exhibits
Exhibit No.
Description
1
.1*
Form of Underwriting Agreement
2
.1.1
Stock Purchase Agreement, dated
    June 18, 2004, by and among Fortress Brookdale Acquisition
    LLC, Provident Senior Living Trust, and BLC Senior Holdings, Inc.
2
.1.2
Amendment No. 1 to Stock
    Purchase Agreement dated August 2, 2004, by and among
    Fortress Brookdale Acquisition LLC, Provident Senior Living
    Trust and BLC Holdings Inc.
2
.1.3
Amendment No. 2 to Stock
    Purchase Agreement dated October 17, 2004, by and among
    Fortress Brookdale Acquisition LLC, Provident Senior Living
    Trust and BLC Holdings Inc.
2
.2.1
Asset Purchase Agreement, dated as
    of September 3, 2004, by and among Fortress CCRC
    Acquisition LLC, as purchaser, Fortress Investment Fund II
    LLC, as guarantor, and The National Benevolent Association of
    the Christian Church (Disciples of Christ) and certain of its
    affiliated entities, as sellers.
2
.2.2
Letter Agreement, dated
    March 9, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress CCRC Acquisition LLC and Fortress Investment
    Fund II, LLC, regarding amendment of the Asset Purchase
    Agreement, dated as of September 3, 2004
2
.2.3
Letter Agreement dated
    April 6, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress CCRC Acquisition, LLC, and Fortress Investment
    Fund II, LLC, regarding Asset Purchase Agreement, dated as
    of September 3, 2004
2
.2.4
Letter Agreement, dated
    April 14, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress NBA Acquisition LLC, and Fortress Investment
    Fund II, LLC, regarding Asset Purchase Agreement, dated as
    of September 3, 2004
2
.2.5
Supplemental Agreement with Respect
    to the Asset Purchase Agreement, dated as of September 30,
    2004, by and among Fortress CCRC Acquisition LLC, Fortress
    Investment Fund II LLC, The National Benevolent Association
    of the Christian Church (Disciples of Christ) and certain of its
    affiliated entities and the Official Committee of Residents
    appointed in Chapter 11 Case of The National Benevolent
    Association of the Christian Church (Disciples of Christ)
2
.3.1
Purchase and Sale Agreement, dated
    March 16, 2005, by and among SHP Pacific Inn, LLC; SHP Nohl
    Ranch, LLC; SHP Gables, LLC; SHP Oak Tree Villa, LLC; SHP
    Lexington, LLC; SHP Inn at the Park, LLC; SHP Paulin Creek, LLC;
    SHP Mirage Inn, LLC; SHP Ocean House, LLC, as sellers, and FIT
    REN LLC, as purchaser
2
.3.2
First Amendment to Purchase and
    Sale Agreement, dated June 10, 2005, by and between SHP
    Pacific Inn, LLC; SHP Nohl Ranch, LLC; SHP Gables, LLC; SHP Oak
    Tree Villa, LLC; SHP Lexington, LLC; SHP Inn at the Park, LLC;
    SHP Paulin Creek, LLC; SHP Mirage Inn, LLC; and SHP Ocean House,
    LLC, as seller, and FIT REN LLC, as buyer.
2
.4
Amended and Restated Stock Purchase
    Agreement, dated October 19, 2004, between Alterra
    Healthcare Corporation and Provident Senior Living Trust,
    related to the Brookdale Tax Matters Agreement
2
.5
Purchase and Sale Agreement, dated
    as of February 28, 2003, by and among ALS Venture II,
    Inc. and Wynwood of Chapel Hill LLC, as sellers, and SNH ALT
    Leased Properties Trust, as purchaser
2
.6*
Membership Interest Purchase
    Agreement,
    dated           ,
    2005, between Brookdale Development, LLC and Alliance Holdings,
    Inc.
2
.7
Membership Interest Purchase
    Agreement (Creve Coeur), dated as of March 1, 2005, between
    Brookdale Development, LLC and DBF Consulting, LLC
II-4
Exhibit No.
Description
2
.8
Stock Purchase Agreement (Raleigh),
    dated as of March 1, 2005, between Brookdale Development,
    LLC and DBF Consulting, LLC
2
.9
Stock Purchase Agreement (Glen
    Ellyn), dated as of March 1, 2005, between Brookdale
    Development, LLC and DBF Consulting, LLC
2
.10
Membership Interest Purchase
    Agreement (Trillium Place), dated as of March 1, 2005,
    between Brookdale Development, LLC and DBF Consulting, LLC
2
.11
Membership Interest Purchase
    Agreement, dated June 29, 2005, by and among NW Select LLC,
    Emeritus Corporation, FIT-ALT Investor LLC and Brookdale Senior
    Living Inc.
2
.12*
Conveyance Agreement, dated as
    of           ,
    2005, by and among Brookdale Senior Living Inc., Brookdale
    Living Communities, Inc., BSL Brookdale Merger Inc., BSL CCRC
    Merger Inc., BSL FEBC Merger Inc., Emeritus Corporation,
    FEBC-ALT Investors LLC, FIT-ALT Investor LLC, Fortress CCRC
    Acquisition LLC, Fortress Investment Trust II, Fortress
    Registered Investment Trust, Fortress Brookdale Acquisition LLC,
    Health Partners and NW Select LLC
3
.1*
Amended and Restated Certificate of
    Incorporation of the Company
3
.2*
Amended and Restated By-laws of the
    Company
4
.1*
Form of Certificate for common stock
4
.2*
Stockholders Agreement, dated as
    of           ,
    2005, among Brookdale Senior Living Inc., Fortress Brookdale
    Acquisition LLC, Fortress Investment Trust II and Health
    Partners
4
.3*
Governance Agreement, dated as
    of           ,
    2005, among Brookdale Senior Living Inc., Fortress Brookdale
    Acquisition LLC, Fortress Investment Trust II and Health
    Partners
4
.4*
Stockholders and Voting Agreement,
    dated as of June 29, 2005, by and among Brookdale Senior
    Living Inc., FIT-ALT Investor LLC, Emeritus Corporation and NW
    Select LLC
5
.1*
Opinion of Skadden, Arps, Slate,
    Meagher & Flom LLP relating to the validity of the
    common stock
10
.1.1
Agreement Regarding Leases, dated
    October 19, 2004, by and between Brookdale Provident
    Properties, LLC and PSLT-BLC Properties Holdings, LLC
10
.1.2
Letter Agreement, dated
    March 28, 2005, regarding the Agreement Regarding Leases,
    dated October 19, 2004, by and between Brookdale Provident
    Properties, LLC and PSLT-BLC Properties Holdings, LLC
10
.2
Guaranty of Agreement Regarding
    Leases, dated October 19, 2004, by Brookdale Living
    Communities, Inc., in favor of PSLT-BLC Properties Holdings, LLC
10
.3.1
Tax Matters Agreement, dated as of
    June 18, 2004, by and among Fortress Brookdale Acquisition
    LLC, Provident Senior Living Trust and Brookdale Living
    Communities, Inc.
10
.3.2
Letter Agreement, dated
    March 28, 2005, amending the Tax Matters Agreement, dated
    as of June 18, 2004, by and among Fortress Brookdale
    Acquisition LLC, Provident Senior Living Trust and Brookdale
    Living Communities, Inc., related to the Brookdale Agreement
    Regarding Leases
10
.4.1
Master Lease Agreement, dated
    January 28, 2004, between Ventas Realty, Limited
    Partnership, BLC Adrian-GC, LLC, BLC Albuquerque-GC, LLC, BLC
    Dayton-GC, LLC and BLC Fort Myers-GC, LLC
10
.4.2
First Amendment to Master Lease
    Agreement, dated February 20, 2004, by and between Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort Myers-GC,
    LLC; BLC Bristol-GC, LLC; and BLC Tavares-GC, LLC
II-5
Exhibit No.
Description
10
.4.3
Second Amendment to Master Lease
    Agreement, dated March 30, 2004, by and between Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort Myers-GC,
    LLC; BLC Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC,
    LLC; BLC Lubbock-GC, L.P.; and BLC Overland Park-GC, LLC
10
.4.4
Third Amendment to Master Lease
    Agreement, dated May 13 2004, by and between Ventas Realty,
    Limited Partnership; BLC Adrian-GC, LLC; BLC Albuquerque-GC,
    LLC; BLC Dayton-GC, LLC; BLC Fort Myers-GC, LLC; BLC
    Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC, LLC; BLC
    Lubbock-GC, L.P.; BLC Overland Park-GC, LLC; and Brookdale
    Living Communities of Illinois-GV, LLC
10
.4.5
Fourth Amendment to Master Lease
    Agreement, dated October 19, 2004, by and among Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort Myers-GC,
    LLC; BLC Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC,
    LLC; BLC Lubbock-GC, L.P.; BLC Overland Park-GC, LLC; and
    Brookdale Living Communities of Illinois-GV, LLC
10
.4.6
Fifth Amendment to Master Lease
    Agreement, dated May 18, 2005, effective as of
    April 30, 2005, by and between Ventas Realty, Limited
    Partnership, BLC Adrian-GC, LLC, BLC Albuquerque-GC, LLC, BLC
    Dayton-GC, LLC, BLC Fort Myers-GC, LLC, BLC Bristol-GC,
    LLC, BLC Tavares-GC, LLC, BLC Las Vegas-GC, LLC, BLC Lubbock-GC,
    L.P., BLC Overland Park-GC, LLC, Brookdale Living Communities Of
    Illinois-GV, LLC, BLC Belleville-GC, LLC, BLC Findlay-GC, LLC,
    and BLC Springfield-GC, LLC
10
.5
Form of Property Lease Agreement
    with respect to the Provident-Brookdale properties
10
.6
Form of Lease Guaranty with respect
    to the Provident-Brookdale properties
10
.7.1
Guaranty of Lease, dated as of
    January 28, 2004, by Brookdale Living Communities, Inc.,
    for the benefit of Ventas Realty, Limited Partnership
10
.7.2
First Amendment to Guaranty of
    Lease, dated as of February 20, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership
10
.7.3
Second Amendment to Guaranty of
    Lease, dated as of February 26, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership
10
.7.4
Third Amendment to Guaranty of
    Lease, dated as of March 10, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership and Ventas Kansas City I, LLC
10
.7.5
Fourth Amendment to Guaranty of
    Lease, dated as of March 30, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City I, LLC; Ventas Belleville,
    LLC; and Ventas Springfield/Findlay, LLC
10
.7.6
Fifth Amendment to Guaranty of
    Lease, dated as of May 13, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City I, LLC; Ventas Belleville,
    LLC; Ventas Farmington Hills, LLC; and Ventas
    Springfield/Findlay, LLC
10
.7.7
Sixth Amendment to Guaranty of
    Lease, dated as of June 18, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City I, LLC; Ventas Belleville,
    LLC; Ventas Springfield/Findlay, LLC; and Ventas Farmington
    Hills, LLC
10
.7.8
Seventh Amendment to Guaranty of
    Lease, dated as of April 30, 2005, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City I, LLC; Ventas Belleville,
    LLC; Ventas Springfield/Findlay, LLC; and Ventas Farmington
    Hills, LLC
10
.8
Master Lease Agreement, dated
    May 1, 2002, by and between CMCP Properties, Inc., BLC
    Properties I, LLC and, for certain limited purposes,
    Brookdale Management Holding, LLC
II-6
Exhibit No.
Description
10
.9
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Club Hill, LP, BLC-Club
    Hill, L.P. and, for certain limited purposes, Brookdale
    Management of Texas, L.P.
10
.10
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Roswell, LLC, BLC-Roswell,
    LLC and, for certain limited purposes, Brookdale Management-II,
    LLC
10
.11
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Pinecastle, LLC,
    BLC-Pinecastle, LLC and, for certain limited purposes, Brookdale
    Management-II, LLC
10
.12
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Williamsburg, LLC,
    BLC-Williamsburg, LLC and, for certain limited purposes,
    Brookdale Management-II, LLC
10
.13
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Montrose, LLC,
    BLC-Montrose, LLC and, for certain limited purposes, Brookdale
    Management — Akron, LLC
10
.14
Property Lease Agreement, dated as
    of May 1, 2002, by and between CMCP — Island
    Lake, LLC and BLC — Island Lake, LLC and, for certain
    limited purposes, Brookdale Management-II, LLC
10
.15
Lease Guaranty, dated as of
    May 1, 2002, by BLC Properties I, LLC in favor of
    CMCP-Roswell, LLC
10
.16
Indemnity and Guaranty Agreement,
    dated May 1, 2002, by Capstead Mortgage Corporation,
    Brookdale Living Communities, Inc., BLC Properties I, LLC,
    BLC Island Lake, LLC, BLC- Windsong, LLC, BLC-Williamsburg, LLC,
    BLC-Montrose, LLC and BLC-Pinecastle, LLC
10
.17
Amended and Restated Limited
    Liability Company Agreement of Brookdale Senior Housing, LLC,
    dated October 19, 2004, among The Northwestern Mutual Life
    Insurance Company, AH Michigan Owner Limited Partnership, and AH
    Pennsylvania Owner Limited Partnership
10
.18
Master Agreement regarding
    Brookdale Senior Housing, LLC and related matters, dated
    September 30, 2003, by and among The Northwestern Mutual
    Life Insurance Company, Brookdale Senior Housing, LLC, AH
    Michigan Owner Limited Partnership, AH Pennsylvania Owner
    Limited Partnership, AH Texas Owner Limited Partnership and
    Brookdale Living Communities, Inc.
10
.19
Guarantee, dated September 30,
    2003, by Brookdale Living Communities, Inc. on behalf of AH
    Pennsylvania Owner Limited Partnership and AH Michigan Owner
    Limited Partnership
10
.20
Guarantee, dated September 30,
    2003, by AH Pennsylvania Owner Limited Partnership, in favor of
    Brookdale Senior Housing, LLC
10
.21
Southfield Guarantee of Recourse
    Obligations (Single Guarantor), dated September 30, 2003,
    by Brookdale Living Communities, Inc. in connection with the
    loan made by Northwestern Mutual Life Insurance Company to
    Brookdale Senior Housing, LLC
10
.22
Guarantee of Member Obligations,
    dated September 30, 2003, among The Northwestern Mutual
    Life Insurance Company, AH Michigan Owner Limited Partnership,
    and AH Pennsylvania Owner Limited Partnership for Brookdale
    Senior Housing, LLC
10
.23
Devonshire First Open-End Mortgage
    and Security Agreement, dated September 30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
10
.24
Devonshire Second Open-End Mortgage
    and Security Agreement, dated September 30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
10
.25
Southfield First Mortgage and
    Security Agreement, dated September 30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
II-7
Exhibit No.
Description
10
.26
Southfield Second Mortgage and
    Security Agreement, dated September 30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
10
.27
Gaines Ranch First Deed of Trust
    and Security Agreement, dated September 30, 2003, between
    AH Texas Owner Limited Partnership, Henry F. Lange, and The
    Northwestern Mutual Life Insurance Company
10
.28
Gaines Ranch Second Deed of Trust
    and Security Agreement, dated September 30, 2003, among AH
    Texas Owner Limited Partnership, Henry F. Lange, and Brookdale
    Senior Housing, LLC
10
.29
Gaines Ranch Third Deed of Trust
    and Security Agreement, dated September 30, 2003, among AH
    Texas Owner Limited Partnership, Henry F. Lange and The
    Northwestern Mutual Life Insurance Company
10
.30
Loan Agreement, dated
    March 30, 2005, among AH Battery Park Owner, LLC, KG
    Missouri-CC Owner, LLC, AH Illinois Owner, LLC, AH North
    Carolina, Owner, LLC, AH Ohio-Columbus Owner, LLC, Guarantee
    Bank, GMAC Commercial Mortgage Corporation and GMAC Commercial
    Mortgage Bank
10
.31
Guaranty, dated March 30,
    2005, among Brookdale Living Communities, Inc., Guarantee Bank,
    GMAC Commercial Mortgage Corporation and GMAC Commercial
    Mortgage Bank
10
.32.1
Loan Agreement, dated
    October 19, 2004, between LaSalle Bank National Association
    and Brookdale Living Communities, Inc.
10
.32.2
Amendment No. 1 to Loan
    Agreement, dated March 1, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
10
.32.3
Amendment No. 2 to Loan
    Agreement, dated March 24, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
10
.32.4
Amendment No. 3 to Loan
    Agreement, dated May 26, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
10
.33
Agreement for Management Services,
    dated July 13, 2004, effective as of August 1, 2004 by
    and between Cyprus Senior Management Services Limited
    Partnership and Brookdale Cyprus Management LLC
10
.34
Loan Agreement, dated as of
    April 6, 2005, among General Electric Capital Corporation,
    Merrill Lynch Capital, FIT NBA Cypress Village LLC, FIT NBA
    Foxwood Springs LLC, FIT NBA Kansas Christian LLC, FIT NBA
    Patriot Heights LP, FIT NBA Ramsey LLC, FIT NBA Robin Run LP,
    and FIT NBA Skyline LLC
10
.35*
Agreement of Principal, by
    Brookdale Senior Living Inc. in favor of General Electric
    Capital Corporation
10
.36
Loan Agreement, dated
    December 31, 2004, by and between AHC Purchaser, Inc. and
    Merrill Lynch Capital
10
.37
Guaranty, dated as of
    December 31, 2004, by Alterra Healthcare Corporation and
    AHC Purchaser Holding, Inc. for the benefit of Merrill Lynch
    Capital
10
.38
Loan Agreement, dated as of
    December 31, 2004, by and between AHC Purchaser
    Holding II, Inc. and Merrill Lynch Capital
10
.39
Guaranty, dated as of
    December 31, 2004, by Alterra Healthcare Corporation for
    the benefit of Merrill Lynch Capital
II-8
Exhibit No.
Description
10
.40
Cross-Collateralization,
    Cross-Default and Cross-Guaranty Agreement, dated May 31,
    2005, among AHC Purchaser, Inc., AHC Purchaser Holding II,
    Inc., Alterra Healthcare Corp., Ithaca Bundy Tenant, Inc.,
    Ithaca Sterling Cottage Operator, Inc., Niagara Sterling Cottage
    Operator, Inc., Niagara Nash Tenant, Inc., and Clinton Sterling
    Cottage Operator, Inc., AHC Purchaser Holding, Inc. and
    Alternative Living Services— New York, Inc., and Merrill
    Lynch Capital
10
.41.1
Amended and Restated Master Lease
    Agreement, dated as of July 1, 2001, by and among Health
    Care REIT, Inc.; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd. and
    Alterra Healthcare Corporation
10
.41.2
First Amendment to the Amended and
    Restated Master Lease Agreement, dated as of July 16, 2001,
    by and among Health Care REIT, Inc.; HCRI North Carolina
    Properties, LLC; HCRI Tennessee Properties, Inc.; HCRI Texas
    Properties, Ltd. and Alterra Healthcare Corporation
10
.41.3
Second Amendment to the Amended and
    Restated Master Lease Agreement, dated as of December 21,
    2001, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
10
.41.4
Third Amendment to the Amended and
    Restated Master Lease Agreement, dated as of March 19,
    2002, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
10
.41.5
Fourth Amendment to the Amended and
    Restated Master Lease Agreement, dated as of December 27,
    2002, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation.
10
.41.6
Fifth Amendment to Amended and
    Restated Master Lease Agreement, dated as of December 4,
    2003, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
10
.41.7
Sixth Amendment to Amended and
    Restated Master Lease Agreement, dated as of June 30, 2004,
    by and among Health Care REIT, Inc.; HCRI Indiana Properties,
    LLC; HCRI North Carolina Properties III, Limited
    Partnership; HCRI Tennessee Properties, Inc.; HCRI Texas
    Properties, Ltd.; HCRI Wisconsin Properties, LLC; and Alterra
    Healthcare Corporation
10
.42.1
Master Lease, dated as of
    April 9, 2002, by and between Alterra Healthcare
    Corporation and Nationwide Health Properties, Inc. and its
    affiliates
10
.42.2
First Amendment to Master Lease and
    Consent to Transfer, dated as of December 2, 2003, by and
    among Alterra Healthcare Corporation; Nationwide Health
    Properties, Inc.; NH Texas Properties Limited Partnership; MLD
    Delaware trust; MLD Properties, LLC; NHP Silverwood Investments,
    Inc.; and NHP Westwood Investments, Inc.
10
.43.1
Master Lease, dated as of
    April 9, 2002, by and among JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, L.P., JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., ALS Leasing, Inc. and Assisted Living Properties, Inc.
10
.43.2
First Amendment to Master Lease,
    Affirmation of Guaranty and Consent to Transfer, dated as of
    September 12, 2003, by and among ALS Leasing, Inc.,
    Assisted Living Properties, Inc., JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, LP, JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., and Alterra Healthcare Corporation
II-9
Exhibit No.
Description
10
.43.3
Second Amendment to Master Lease,
    dated as of February 23, 2004, by and among ALS Leasing,
    Inc., Assisted Living Properties, Inc., JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, LP, JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., and Alterra Healthcare Corporation
10
.44
Guaranty of Lease and Letter of
    Credit Agreement dated as of April 9, 2002 by and among
    Alterra Healthcare Corporation, JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, L.P., JER/NHP
    Senior Living Wisconsin, LLC, and JER/NHP Senior Living Kansas,
    Inc.
10
.45.1
Master Lease (Alterra Pool 2),
    dated as of October 7, 2002, by and between JER/NHP Senior
    Living Acquisition, LLC and ALS Leasing, Inc
10
.45.2
First Amendment to Master Lease,
    Affirmation of Guaranty and Consent to Transfer, dated
    September 12, 2003, by and among ALS Leasing, Inc., JER/NHP
    Senior Living Acquisition, LLC and Alterra Healthcare Corporation
10
.46
Guaranty of Lease and Letter of
    Credit Agreement, dated as of October 7, 2002, by and
    between Alterra Healthcare Corporation and JER/NHP Senior Living
    Acquisition, LLC
10
.47
Amended and Restated Lease, dated
    December 15, 2002, between LTC-K1 Inc., as lessor and
    Alterra Healthcare Corporation, as lessee
10
.48
Amended and Restated Lease, dated
    December 15, 2002, between LTC-K2 Limited Partnership, as
    lessor and Alterra Healthcare Corporation, as lessee
10
.49
Master Lease Agreement, dated
    December 15, 2002, between Kansas-LTC Corporation, as
    lessor, and Alterra Healthcare Corporation, as lessee
10
.50
Master Lease Agreement, dated
    December 15, 2002 among LTC Properties, Inc., Texas-LTC
    Limited Partnership, and North Carolina Real Estate Investments,
    LLC, as lessor, and Alterra Healthcare Corporation, as lessee
10
.51.1
Lease Agreement, dated as of
    February 28, 2003, by AHC Trailside, Inc. in favor of SNH
    ALT Leased Properties Trust
10
.51.2
First Amendment to Lease Agreement,
    dated as of December 4, 2003, by and between AHC Trailside,
    Inc., and SNH ALT Leased Properties Trust
10
.52.1
Guaranty Agreement, dated as of
    February 28, 2003, by Alterra Healthcare Corporation in
    favor of SNH ALT Leased Properties Trust
10
.52.2
First Amendment to Guaranty
    Agreement, dated as of December 4, 2003, by Alterra
    Healthcare Corporation in favor of SNH ALT Leased Properties
    Trust
10
.53
Tri-Party Agreement, dated
    December 4, 2003, by and among SNH ALT Mortgaged Properties
    Trust, SNH ALT Leased Properties Trust, FIT-ALT SNH Loan LLC,
    Pomacy Corporation, AHC Trailside, Inc., and Alterra Healthcare
    Corporation
10
.54.1
Property Lease Agreement, dated
    October 19, 2004, by and between PSLT-ALS
    Properties I, LLC, and ALS Properties Tenant I, LLC.
10
.54.2
Amended and Restated Property Lease
    Agreement, dated as of December 16, 2004, by and between
    PSLT-ALS Properties II, LLC and ALS Properties
    Tenant II, LLC
10
.55
Sublease Agreement, dated
    October 21, 2004, by and between ALS Properties
    Tenant I, LLC and Alterra Healthcare Corporation
10
.56
Agreement Regarding Leases, dated
    October 20, 2004, by and between ALS Properties Holding
    Company, LLC and PSLT-ALS Properties Holdings, LLC
10
.57
Guaranty of Agreement Regarding
    Leases, dated October 20, 2004, by Alterra Healthcare
    Corporation in favor of PSLT-ALS Properties Holdings, LLC
10
.58
Form of Property Lease Agreement
    with respect to the Provident-Alterra properties
10
.59
Form of Lease Guaranty with respect
    to the Provident-Alterra Properties
10
.60.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Park LP,
    as borrower, to Fidelity National Title Company, as trustee, for
    the benefit of GMAC Commercial Mortgage Bank, as lender
II-10
Exhibit No.
Description
10
.60.2
Multifamily Note in the amount of
    $22,545,000, dated June 21, 2005, from FIT REN
    Park, LP to GMAC Commercial Mortgage Bank
10
.60.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.61.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Nohl
    Ranch LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.61.2
Multifamily Note in the amount of
    $7,920,000, dated June 21, 2005, from FIT REN Nohl
    Ranch, LP to GMAC Commercial Mortgage Bank
10
.61.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.62.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Mirage
    Inn LP, as borrower, to Fidelity National Title Company, as
    trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.62.2
Multifamily Note in the amount of
    $15,000,000, dated June 21, 2005, from FIT REN Mirage Inn,
    LP to GMAC Commercial Mortgage Bank
10
.62.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.63.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Pacific
    Inn LP, as borrower, to Fidelity National Title Company, as
    trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.63.2
Multifamily Note in the amount of
    $25,775,000, dated June 21, 2005, from FIT REN Pacific Inn,
    LP to GMAC Commercial Mortgage Bank
10
.63.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.64.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN The
    Gables LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.64.2
Multifamily Note in the amount of
    $5,255,000, dated June 21, 2005, from FIT REN The
    Gables, LP to GMAC Commercial Mortgage Bank
10
.64.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.65.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN The
    Lexington LP, as borrower, to Fidelity National Title
    Company, as trustee, for the benefit of GMAC Commercial Mortgage
    Bank, as lender
10
.65.2
Multifamily Note in the amount of
    $10,867,974.00, dated June 21, 2005 from FIT REN The
    Lexington, LP to GMAC Commercial Mortgage Bank
10
.65.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.66.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Oak
    Tree LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.66.2
Multifamily Note in the amount of
    $23,305,026, dated June 21, 2005, from FIT REN Oak
    Tree, LP to GMAC Commercial Mortgage Bank
II-11
Exhibit No.
Description
10
.66.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.67.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Paulin
    Creek LP, as borrower, to Fidelity National
    Title Company, as trustee, for the benefit of GMAC
    Commercial Mortgage Bank, as lender
10
.67.2
Multifamily Note in the amount of
    $40,732,000, dated June 21, 2005, from FIT REN Paulin
    Creek, LP to GMAC Commercial Mortgage Bank
10
.67.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.68.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated July 22, 2005, by FIT REN Ocean House
    LP, as borrower, to Fidelity National Title Company, as trustee,
    for the benefit of GMAC Commercial Mortgage Bank, as lender
10
.68.2
Multifamily Note in the amount of
    $19,600,000, dated July 22, 2005, from FIT REN Ocean House,
    LP to GMAC Commercial Mortgage Bank
10
.68.3
Exceptions to Non Recourse
    Guaranty, dated July 22, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
21
.1*
Subsidiaries of the registrant
23
.1*
Consent of Skadden, Arps, Slate,
    Meagher & Flom LLP (included in Exhibit 5.1)
23
.2
Consent of Ernst & Young
    LLP
23
.3
Consent of KPMG LLP
24
.1
Powers of Attorney (included on the
    signature pages hereto)
*
To be filed by amendment.
B.
Financial Statement Schedules
See Schedule II — Valuation and Qualification
Accounts, included in the Combined Financial Statements in
Part I of this Registration Statement.
Item 17.
Undertakings
(1) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by
a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is
asserted against the registrant by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-12
(2) The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this Registration Statement in
    reliance upon Rule 430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of this Registration Statement as
    of the time it was declared effective.
(b) For the purpose of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new Registration
    Statement relating to the securities offered therein, and this
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.
(3) The undersigned hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement, certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery thereof.
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this Registration
Statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois, on August 9, 2005.
BROOKDALE SENIOR LIVING INC.
By:
/s/
Mark J. Schulte
Name: Mark J. Schulte
Title:
Chief Executive Officer
POWER OF ATTORNEY
In accordance with the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed by
the following persons in the capacities and on the dates stated.
Each person whose signature appears below constitutes and
appoints Wesley R. Edens, Mark J. Schulte, R. Stanley Young and
Deborah C. Paskin and each of them severally, as his or her true
and lawful attorney-in-fact and agent, each acting along with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any or all amendments (including
post-effective amendments) and exhibits to the Registration
Statement on Form S-1, and to any registration statement
filed under Commission Rule 462, and to file the same, with
all exhibits thereto, and all documents in connection therewith,
with the Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/
Wesley R. Edens
Wesley
    R. Edens
Chairman of the Board
August 9, 2005
/s/
Mark J. Schulte
Mark
    J. Schulte
Chief Executive Officer
August 9, 2005
/s/
R. Stanley Young
R.
    Stanley Young
Executive Vice President and Chief
    Financial Officer
August 9, 2005
/s/
Randal A. Nardone
Randal
    A. Nardone
Director
August 9, 2005
/s/
William B. Doniger
William
    B. Doniger
Director
August 9, 2005
II-14
INDEX TO EXHIBITS
Exhibit No.
Description
1
.1*
Form of Underwriting Agreement
2
.1.1
Stock Purchase Agreement, dated
    June 18, 2004, by and among Fortress Brookdale Acquisition
    LLC, Provident Senior Living Trust, and BLC Senior Holdings, Inc.
2
.1.2
Amendment No. 1 to Stock
    Purchase Agreement dated August 2, 2004, by and among
    Fortress Brookdale Acquisition LLC, Provident Senior Living
    Trust and BLC Holdings Inc.
2
.1.3
Amendment No. 2 to Stock
    Purchase Agreement dated October 17, 2004, by and among
    Fortress Brookdale Acquisition LLC, Provident Senior Living
    Trust and BLC Holdings Inc.
2
.2.1
Asset Purchase Agreement, dated as
    of September 3, 2004, by and among Fortress CCRC
    Acquisition LLC, as purchaser, Fortress Investment Fund II
    LLC, as guarantor, and The National Benevolent Association of
    the Christian Church (Disciples of Christ) and certain of its
    affiliated entities, as sellers.
2
.2.2
Letter Agreement, dated
    March 9, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress CCRC Acquisition LLC and Fortress Investment
    Fund II, LLC, regarding amendment of the Asset Purchase
    Agreement, dated as of September 3, 2004
2
.2.3
Letter Agreement dated
    April 6, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress CCRC Acquisition, LLC, and Fortress Investment
    Fund II, LLC, regarding Asset Purchase Agreement, dated as
    of September 3, 2004
2
.2.4
Letter Agreement, dated
    April 14, 2005, by and among The National Benevolent
    Association of the Christian Church (Disciples of Christ),
    Fortress NBA Acquisition LLC, and Fortress Investment
    Fund II, LLC, regarding Asset Purchase Agreement, dated as
    of September 3, 2004
2
.2.5
Supplemental Agreement with Respect
    to the Asset Purchase Agreement, dated as of September 30,
    2004, by and among Fortress CCRC Acquisition LLC, Fortress
    Investment Fund II LLC, The National Benevolent Association
    of the Christian Church (Disciples of Christ) and certain of its
    affiliated entities and the Official Committee of Residents
    appointed in Chapter 11 Case of The National Benevolent
    Association of the Christian Church (Disciples of Christ)
2
.3.1
Purchase and Sale Agreement, dated
    March 16, 2005, by and among SHP Pacific Inn, LLC; SHP Nohl
    Ranch, LLC; SHP Gables, LLC; SHP Oak Tree Villa, LLC; SHP
    Lexington, LLC; SHP Inn at the Park, LLC; SHP Paulin Creek, LLC;
    SHP Mirage Inn, LLC; SHP Ocean House, LLC, as sellers, and FIT
    REN LLC, as purchaser
2
.3.2
First Amendment to Purchase and
    Sale Agreement, dated June 10, 2005, by and between SHP
    Pacific Inn, LLC; SHP Nohl Ranch, LLC; SHP Gables, LLC; SHP Oak
    Tree Villa, LLC; SHP Lexington, LLC; SHP Inn at the Park, LLC;
    SHP Paulin Creek, LLC; SHP Mirage Inn, LLC; and SHP Ocean House,
    LLC, as seller, and FIT REN LLC, as buyer.
2
.4
Amended and Restated Stock Purchase
    Agreement, dated October 19, 2004, between Alterra
    Healthcare Corporation and Provident Senior Living Trust,
    related to the Brookdale Tax Matters Agreement
2
.5
Purchase and Sale Agreement, dated
    as of February 28, 2003, by and among ALS Venture II,
    Inc. and Wynwood of Chapel Hill LLC, as sellers, and SNH ALT
    Leased Properties Trust, as purchaser
2
.6*
Membership Interest Purchase
    Agreement,
    dated           ,
    2005, between Brookdale Development, LLC and Alliance Holdings,
    Inc.
2
.7
Membership Interest Purchase
    Agreement (Creve Coeur), dated as of March 1, 2005, between
    Brookdale Development, LLC and DBF Consulting, LLC
2
.8
Stock Purchase Agreement (Raleigh),
    dated as of March 1, 2005, between Brookdale Development,
    LLC and DBF Consulting, LLC
II-15
Exhibit No.
Description
2
.9
Stock Purchase Agreement (Glen
    Ellyn), dated as of March 1, 2005, between Brookdale
    Development, LLC and DBF Consulting, LLC
2
.10
Membership Interest Purchase
    Agreement (Trillium Place), dated as of March 1, 2005,
    between Brookdale Development, LLC and DBF Consulting, LLC
2
.11
Membership Interest Purchase
    Agreement, dated June 29, 2005, by and among NW Select LLC,
    Emeritus Corporation, FIT-ALT Investor LLC and Brookdale Senior
    Living Inc.
2
.12*
Conveyance Agreement, dated as
    of           ,
    2005, by and among Brookdale Senior Living Inc., Brookdale
    Living Communities, Inc., BSL Brookdale Merger Inc., BSL CCRC
    Merger Inc., BSL FEBC Merger Inc., Emeritus Corporation,
    FEBC-ALT Investors LLC, FIT-ALT Investor LLC, Fortress CCRC
    Acquisition LLC, Fortress Investment Trust II, Fortress
    Registered Investment Trust, Fortress Brookdale Acquisition LLC,
    Health Partners and NW Select LLC
3
.1*
Amended and Restated Certificate of
    Incorporation of the Company
3
.2*
Amended and Restated By-laws of the
    Company
4
.1*
Form of Certificate for common stock
4
.2*
Stockholders Agreement, dated as
    of           ,
    2005, among Brookdale Senior Living Inc., Fortress Brookdale
    Acquisition LLC, Fortress Investment Trust II and Health
    Partners
4
.3*
Governance Agreement, dated as
    of           ,
    2005, among Brookdale Senior Living Inc., Fortress Brookdale
    Acquisition LLC, Fortress Investment Trust II and Health
    Partners
4
.4*
Stockholders and Voting Agreement,
    dated as of June 29, 2005, by and among Brookdale Senior
    Living Inc., FIT-ALT Investor LLC, Emeritus Corporation and NW
    Select LLC
5
.1*
Opinion of Skadden, Arps, Slate,
    Meagher & Flom LLP relating to the validity of the
    common stock
10
.1.1
Agreement Regarding Leases, dated
    October 19, 2004, by and between Brookdale Provident
    Properties, LLC and PSLT-BLC Properties Holdings, LLC
10
.1.2
Letter Agreement, dated
    March 28, 2005, regarding the Agreement Regarding Leases,
    dated October 19, 2004, by and between Brookdale Provident
    Properties, LLC and PSLT-BLC Properties Holdings, LLC
10
.2
Guaranty of Agreement Regarding
    Leases, dated October 19, 2004, by Brookdale Living
    Communities, Inc., in favor of PSLT-BLC Properties Holdings, LLC
10
.3.1
Tax Matters Agreement, dated as of
    June 18, 2004, by and among Fortress Brookdale Acquisition
    LLC, Provident Senior Living Trust and Brookdale Living
    Communities, Inc.
10
.3.2
Letter Agreement, dated
    March 28, 2005, amending the Tax Matters Agreement, dated
    as of June 18, 2004, by and among Fortress Brookdale
    Acquisition LLC, Provident Senior Living Trust and Brookdale
    Living Communities, Inc., related to the Brookdale Agreement
    Regarding Leases
10
.4.1
Master Lease Agreement, dated
    January 28, 2004, between Ventas Realty, Limited
    Partnership, BLC Adrian-GC, LLC, BLC Albuquerque-GC, LLC, BLC
    Dayton-GC, LLC and BLC Fort Myers-GC, LLC
10
.4.2
First Amendment to Master Lease
    Agreement, dated February 20, 2004, by and between Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort Myers-GC,
    LLC; BLC Bristol-GC, LLC; and BLC Tavares-GC, LLC
10
.4.3
Second Amendment to Master Lease
    Agreement, dated March 30, 2004, by and between Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort Myers-GC,
    LLC; BLC Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC,
    LLC; BLC Lubbock-GC, L.P.; and BLC Overland Park-GC, LLC
II-16
Exhibit No.
Description
10
.4.4
Third Amendment to Master Lease
    Agreement, dated May 13 2004, by and between Ventas Realty,
    Limited Partnership; BLC Adrian-GC, LLC; BLC Albuquerque-GC,
    LLC; BLC Dayton-GC, LLC; BLC Fort Myers-GC, LLC; BLC
    Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC, LLC; BLC
    Lubbock-GC, L.P.; BLC Overland Park-GC, LLC; and Brookdale
    Living Communities of Illinois-GV, LLC
10
.4.5
Fourth Amendment to Master Lease
    Agreement, dated October 19, 2004, by and among Ventas
    Realty, Limited Partnership; BLC Adrian-GC, LLC; BLC
    Albuquerque-GC, LLC; BLC Dayton-GC, LLC; BLC Fort Myers-GC,
    LLC; BLC Bristol-GC, LLC; BLC Tavares-GC, LLC; BLC Las Vegas-GC,
    LLC; BLC Lubbock-GC, L.P.; BLC Overland Park-GC, LLC; and
    Brookdale Living Communities of Illinois-GV, LLC
10
.4.6
Fifth Amendment to Master Lease
    Agreement, dated May 18, 2005, effective as of
    April 30, 2005, by and between Ventas Realty, Limited
    Partnership, BLC Adrian-GC, LLC, BLC Albuquerque-GC, LLC, BLC
    Dayton-GC, LLC, BLC Fort Myers-GC, LLC, BLC Bristol-GC,
    LLC, BLC Tavares-GC, LLC, BLC Las Vegas-GC, LLC, BLC Lubbock-GC,
    L.P., BLC Overland Park-GC, LLC, Brookdale Living Communities Of
    Illinois-GV, LLC, BLC Belleville-GC, LLC, BLC Findlay-GC, LLC,
    and BLC Springfield-GC, LLC
10
.5
Form of Property Lease Agreement
    with respect to the Provident-Brookdale properties
10
.6
Form of Lease Guaranty with respect
    to the Provident-Brookdale properties
10
.7.1
Guaranty of Lease, dated as of
    January 28, 2004, by Brookdale Living Communities, Inc.,
    for the benefit of Ventas Realty, Limited Partnership
10
.7.2
First Amendment to Guaranty of
    Lease, dated as of February 20, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership
10
.7.3
Second Amendment to Guaranty of
    Lease, dated as of February 26, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership
10
.7.4
Third Amendment to Guaranty of
    Lease, dated as of March 10, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership and Ventas Kansas City I, LLC
10
.7.5
Fourth Amendment to Guaranty of
    Lease, dated as of March 30, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City I, LLC; Ventas Belleville,
    LLC; and Ventas Springfield/Findlay, LLC
10
.7.6
Fifth Amendment to Guaranty of
    Lease, dated as of May 13, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City I, LLC; Ventas Belleville,
    LLC; Ventas Farmington Hills, LLC; and Ventas
    Springfield/Findlay, LLC
10
.7.7
Sixth Amendment to Guaranty of
    Lease, dated as of June 18, 2004, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City I, LLC; Ventas Belleville,
    LLC; Ventas Springfield/Findlay, LLC; and Ventas Farmington
    Hills, LLC
10
.7.8
Seventh Amendment to Guaranty of
    Lease, dated as of April 30, 2005, by Brookdale Living
    Communities, Inc. for the benefit of Ventas Realty, Limited
    Partnership; Ventas Kansas City I, LLC; Ventas Belleville,
    LLC; Ventas Springfield/Findlay, LLC; and Ventas Farmington
    Hills, LLC
10
.8
Master Lease Agreement, dated
    May 1, 2002, by and between CMCP Properties, Inc., BLC
    Properties I, LLC and, for certain limited purposes,
    Brookdale Management Holding, LLC
10
.9
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Club Hill, LP, BLC-Club
    Hill, L.P. and, for certain limited purposes, Brookdale
    Management of Texas, L.P.
10
.10
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Roswell, LLC, BLC-Roswell,
    LLC and, for certain limited purposes, Brookdale Management-II,
    LLC
10
.11
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Pinecastle, LLC,
    BLC-Pinecastle, LLC and, for certain limited purposes, Brookdale
    Management-II, LLC
II-17
Exhibit No.
Description
10
.12
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Williamsburg, LLC,
    BLC-Williamsburg, LLC and, for certain limited purposes,
    Brookdale Management-II, LLC
10
.13
Property Lease Agreement, dated
    May 1, 2002, by and between CMCP-Montrose, LLC,
    BLC-Montrose, LLC and, for certain limited purposes, Brookdale
    Management — Akron, LLC
10
.14
Property Lease Agreement, dated as
    of May 1, 2002, by and between CMCP — Island
    Lake, LLC and BLC — Island Lake, LLC and, for certain
    limited purposes, Brookdale Management-II, LLC
10
.15
Lease Guaranty, dated as of
    May 1, 2002, by BLC Properties I, LLC in favor of
    CMCP-Roswell, LLC
10
.16
Indemnity and Guaranty Agreement,
    dated May 1, 2002, by Capstead Mortgage Corporation,
    Brookdale Living Communities, Inc., BLC Properties I, LLC,
    BLC Island Lake, LLC, BLC- Windsong, LLC, BLC-Williamsburg, LLC,
    BLC-Montrose, LLC and BLC-Pinecastle, LLC
10
.17
Amended and Restated Limited
    Liability Company Agreement of Brookdale Senior Housing, LLC,
    dated October 19, 2004, among The Northwestern Mutual Life
    Insurance Company, AH Michigan Owner Limited Partnership, and AH
    Pennsylvania Owner Limited Partnership
10
.18
Master Agreement regarding
    Brookdale Senior Housing, LLC and related matters, dated
    September 30, 2003, by and among The Northwestern Mutual
    Life Insurance Company, Brookdale Senior Housing, LLC, AH
    Michigan Owner Limited Partnership, AH Pennsylvania Owner
    Limited Partnership, AH Texas Owner Limited Partnership and
    Brookdale Living Communities, Inc.
10
.19
Guarantee, dated September 30,
    2003, by Brookdale Living Communities, Inc. on behalf of AH
    Pennsylvania Owner Limited Partnership and AH Michigan Owner
    Limited Partnership
10
.20
Guarantee, dated September 30,
    2003, by AH Pennsylvania Owner Limited Partnership, in favor of
    Brookdale Senior Housing, LLC
10
.21
Southfield Guarantee of Recourse
    Obligations (Single Guarantor), dated September 30, 2003,
    by Brookdale Living Communities, Inc. in connection with the
    loan made by Northwestern Mutual Life Insurance Company to
    Brookdale Senior Housing, LLC
10
.22
Guarantee of Member Obligations,
    dated September 30, 2003, among The Northwestern Mutual
    Life Insurance Company, AH Michigan Owner Limited Partnership,
    and AH Pennsylvania Owner Limited Partnership for Brookdale
    Senior Housing, LLC
10
.23
Devonshire First Open-End Mortgage
    and Security Agreement, dated September 30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
10
.24
Devonshire Second Open-End Mortgage
    and Security Agreement, dated September 30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
10
.25
Southfield First Mortgage and
    Security Agreement, dated September 30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
10
.26
Southfield Second Mortgage and
    Security Agreement, dated September 30, 2003, between
    Brookdale Senior Housing, LLC and The Northwestern Mutual Life
    Insurance Company
10
.27
Gaines Ranch First Deed of Trust
    and Security Agreement, dated September 30, 2003, between
    AH Texas Owner Limited Partnership, Henry F. Lange, and The
    Northwestern Mutual Life Insurance Company
10
.28
Gaines Ranch Second Deed of Trust
    and Security Agreement, dated September 30, 2003, among AH
    Texas Owner Limited Partnership, Henry F. Lange, and Brookdale
    Senior Housing, LLC
II-18
Exhibit No.
Description
10
.29
Gaines Ranch Third Deed of Trust
    and Security Agreement, dated September 30, 2003, among AH
    Texas Owner Limited Partnership, Henry F. Lange and The
    Northwestern Mutual Life Insurance Company
10
.30
Loan Agreement, dated
    March 30, 2005, among AH Battery Park Owner, LLC, KG
    Missouri-CC Owner, LLC, AH Illinois Owner, LLC, AH North
    Carolina, Owner, LLC, AH Ohio-Columbus Owner, LLC, Guarantee
    Bank, GMAC Commercial Mortgage Corporation and GMAC Commercial
    Mortgage Bank
10
.31
Guaranty, dated March 30,
    2005, among Brookdale Living Communities, Inc., Guarantee Bank,
    GMAC Commercial Mortgage Corporation and GMAC Commercial
    Mortgage Bank
10
.32.1
Loan Agreement, dated
    October 19, 2004, between LaSalle Bank National Association
    and Brookdale Living Communities, Inc.
10
.32.2
Amendment No. 1 to Loan
    Agreement, dated March 1, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
10
.32.3
Amendment No. 2 to Loan
    Agreement, dated March 24, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
10
.32.4
Amendment No. 3 to Loan
    Agreement, dated May 26, 2005, between LaSalle National
    Bank National Association and Brookdale Living Communities, Inc.
10
.33
Agreement for Management Services,
    dated July 13, 2004, effective as of August 1, 2004 by
    and between Cyprus Senior Management Services Limited
    Partnership and Brookdale Cyprus Management LLC
10
.34
Loan Agreement, dated as of
    April 6, 2005, among General Electric Capital Corporation,
    Merrill Lynch Capital, FIT NBA Cypress Village LLC, FIT NBA
    Foxwood Springs LLC, FIT NBA Kansas Christian LLC, FIT NBA
    Patriot Heights LP, FIT NBA Ramsey LLC, FIT NBA Robin Run
    LP, and FIT NBA Skyline LLC
10
.35*
Agreement of Principal, by
    Brookdale Senior Living Inc. in favor of General Electric
    Capital Corporation
10
.36
Loan Agreement, dated
    December 31, 2004, by and between AHC Purchaser, Inc. and
    Merrill Lynch Capital
10
.37
Guaranty, dated as of
    December 31, 2004, by Alterra Healthcare Corporation and
    AHC Purchaser Holding, Inc. for the benefit of Merrill Lynch
    Capital
10
.38
Loan Agreement, dated as of
    December 31, 2004, by and between AHC Purchaser
    Holding II, Inc. and Merrill Lynch Capital
10
.39
Guaranty, dated as of
    December 31, 2004, by Alterra Healthcare Corporation for
    the benefit of Merrill Lynch Capital
10
.40
Cross-Collateralization,
    Cross-Default and Cross-Guaranty Agreement, dated May 31,
    2005, among AHC Purchaser, Inc., AHC Purchaser Holding II,
    Inc., Alterra Healthcare Corp., Ithaca Bundy Tenant, Inc.,
    Ithaca Sterling Cottage Operator, Inc., Niagara Sterling Cottage
    Operator, Inc., Niagara Nash Tenant, Inc., and Clinton Sterling
    Cottage Operator, Inc., AHC Purchaser Holding, Inc. and
    Alternative Living Services— New York, Inc., and Merrill
    Lynch Capital
10
.41.1
Amended and Restated Master Lease
    Agreement, dated as of July 1, 2001, by and among Health
    Care REIT, Inc.; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd. and
    Alterra Healthcare Corporation
10
.41.2
First Amendment to the Amended and
    Restated Master Lease Agreement, dated as of July 16, 2001,
    by and among Health Care REIT, Inc.; HCRI North Carolina
    Properties, LLC; HCRI Tennessee Properties, Inc.; HCRI Texas
    Properties, Ltd. and Alterra Healthcare Corporation
10
.41.3
Second Amendment to the Amended and
    Restated Master Lease Agreement, dated as of December 21,
    2001, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
II-19
Exhibit No.
Description
10
.41.4
Third Amendment to the Amended and
    Restated Master Lease Agreement, dated as of March 19,
    2002, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
10
.41.5
Fourth Amendment to the Amended and
    Restated Master Lease Agreement, dated as of December 27,
    2002, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation.
10
.41.6
Fifth Amendment to Amended and
    Restated Master Lease Agreement, dated as of December 4,
    2003, by and among Health Care REIT, Inc.; HCRI Indiana
    Properties, LLC; HCRI North Carolina Properties, LLC; HCRI
    Tennessee Properties, Inc.; HCRI Texas Properties, Ltd.; HCRI
    Wisconsin Properties, LLC; and Alterra Healthcare Corporation
10
.41.7
Sixth Amendment to Amended and
    Restated Master Lease Agreement, dated as of June 30, 2004,
    by and among Health Care REIT, Inc.; HCRI Indiana Properties,
    LLC; HCRI North Carolina Properties III, Limited
    Partnership; HCRI Tennessee Properties, Inc.; HCRI Texas
    Properties, Ltd.; HCRI Wisconsin Properties, LLC; and Alterra
    Healthcare Corporation
10
.42.1
Master Lease, dated as of
    April 9, 2002, by and between Alterra Healthcare
    Corporation and Nationwide Health Properties, Inc. and its
    affiliates
10
.42.2
First Amendment to Master Lease and
    Consent to Transfer, dated as of December 2, 2003, by and
    among Alterra Healthcare Corporation; Nationwide Health
    Properties, Inc.; NH Texas Properties Limited Partnership; MLD
    Delaware trust; MLD Properties, LLC; NHP Silverwood Investments,
    Inc.; and NHP Westwood Investments, Inc.
10
.43.1
Master Lease, dated as of
    April 9, 2002, by and among JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, L.P., JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., ALS Leasing, Inc. and Assisted Living Properties, Inc.
10
.43.2
First Amendment to Master Lease,
    Affirmation of Guaranty and Consent to Transfer, dated as of
    September 12, 2003, by and among ALS Leasing, Inc.,
    Assisted Living Properties, Inc., JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, LP, JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., and Alterra Healthcare Corporation
10
.43.3
Second Amendment to Master Lease,
    dated as of February 23, 2004, by and among ALS Leasing,
    Inc., Assisted Living Properties, Inc., JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, LP, JER/NHP
    Senior Living Wisconsin, LLC, JER/NHP Senior Living Kansas,
    Inc., and Alterra Healthcare Corporation
10
.44
Guaranty of Lease and Letter of
    Credit Agreement dated as of April 9, 2002 by and among
    Alterra Healthcare Corporation, JER/NHP Senior Living
    Acquisition, LLC, JER/NHP Senior Living Texas, L.P., JER/NHP
    Senior Living Wisconsin, LLC, and JER/NHP Senior Living Kansas,
    Inc.
10
.45.1
Master Lease (Alterra Pool 2),
    dated as of October 7, 2002, by and between JER/NHP Senior
    Living Acquisition, LLC and ALS Leasing, Inc.
10
.45.2
First Amendment to Master Lease,
    Affirmation of Guaranty and Consent to Transfer, dated
    September 12, 2003, by and among ALS Leasing, Inc., JER/NHP
    Senior Living Acquisition, LLC and Alterra Healthcare Corporation
10
.46
Guaranty of Lease and Letter of
    Credit Agreement, dated as of October 7, 2002, by and
    between Alterra Healthcare Corporation and JER/NHP Senior Living
    Acquisition, LLC
10
.47
Amended and Restated Lease, dated
    December 15, 2002, between LTC-K1 Inc., as lessor and
    Alterra Healthcare Corporation, as lessee
10
.48
Amended and Restated Lease, dated
    December 15, 2002, between LTC-K2 Limited Partnership, as
    lessor and Alterra Healthcare Corporation, as lessee
II-20
Exhibit No.
Description
10
.49
Master Lease Agreement, dated
    December 15, 2002, between Kansas-LTC Corporation, as
    lessor, and Alterra Healthcare Corporation, as lessee
10
.50
Master Lease Agreement, dated
    December 15, 2002 among LTC Properties, Inc., Texas-LTC
    Limited Partnership, and North Carolina Real Estate Investments,
    LLC, as lessor, and Alterra Healthcare Corporation, as lessee
10
.51.1
Lease Agreement, dated as of
    February 28, 2003, by AHC Trailside, Inc. in favor of SNH
    ALT Leased Properties Trust
10
.51.2
First Amendment to Lease Agreement,
    dated as of December 4, 2003, by and between AHC Trailside,
    Inc., and SNH ALT Leased Properties Trust
10
.52.1
Guaranty Agreement, dated as of
    February 28, 2003, by Alterra Healthcare Corporation in
    favor of SNH ALT Leased Properties Trust
10
.52.2
First Amendment to Guaranty
    Agreement, dated as of December 4, 2003, by Alterra
    Healthcare Corporation in favor of SNH ALT Leased Properties
    Trust
10
.53
Tri-Party Agreement, dated
    December 4, 2003, by and among SNH ALT Mortgaged Properties
    Trust, SNH ALT Leased Properties Trust, FIT-ALT SNH Loan LLC,
    Pomacy Corporation, AHC Trailside, Inc., and Alterra Healthcare
    Corporation
10
.54.1
Property Lease Agreement, dated
    October 19, 2004, by and between PSLT-ALS
    Properties I, LLC, and ALS Properties Tenant I, LLC
10
.54.2
Amended and Restated Property Lease
    Agreement, dated as of December 16, 2004, by and between
    PSLT-ALS Properties II, LLC and ALS Properties
    Tenant II, LLC
10
.55
Sublease Agreement, dated
    October 21, 2004, by and between ALS Properties
    Tenant I, LLC and Alterra Healthcare Corporation
10
.56
Agreement Regarding Leases, dated
    October 20, 2004, by and between ALS Properties Holding
    Company, LLC and PSLT-ALS Properties Holdings, LLC
10
.57
Guaranty of Agreement Regarding
    Leases, dated October 20, 2004, by Alterra Healthcare
    Corporation in favor of PSLT-ALS Properties Holdings, LLC
10
.58
Form of Property Lease Agreement
    with respect to the Provident-Alterra properties
10
.59
Form of Lease Guaranty with respect
    to the Provident-Alterra Properties
10
.60.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Park LP,
    as borrower, to Fidelity National Title Company, as trustee, for
    the benefit of GMAC Commercial Mortgage Bank, as lender
10
.60.2
Multifamily Note in the amount of
    $22,545,000, dated June 21, 2005, from FIT REN
    Park, LP to GMAC Commercial Mortgage Bank
10
.60.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.61.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Nohl
    Ranch LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.61.2
Multifamily Note in the amount of
    $7,920,000, dated June 21, 2005, from FIT REN Nohl
    Ranch, LP to GMAC Commercial Mortgage Bank
10
.61.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.62.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Mirage
    Inn LP, as borrower, to Fidelity National Title Company, as
    trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.62.2
Multifamily Note in the amount of
    $15,000,000, dated June 21, 2005, from FIT REN Mirage Inn,
    LP to GMAC Commercial Mortgage Bank
10
.62.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
II-21
Exhibit No.
Description
10
.63.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Pacific
    Inn LP, as borrower, to Fidelity National Title Company, as
    trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.63.2
Multifamily Note in the amount of
    $25,775,000, dated June 21, 2005, from FIT REN Pacific Inn,
    LP to GMAC Commercial Mortgage Bank
10
.63.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.64.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN The
    Gables LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.64.2
Multifamily Note in the amount of
    $5,255,000, dated June 21, 2005, from FIT REN The
    Gables, LP to GMAC Commercial Mortgage Bank
10
.64.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.65.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN The
    Lexington LP, as borrower, to Fidelity National Title
    Company, as trustee, for the benefit of GMAC Commercial Mortgage
    Bank, as lender
10
.65.2
Multifamily Note in the amount of
    $10,867,974.00, dated June 21, 2005 from FIT REN The
    Lexington, LP to GMAC Commercial Mortgage Bank
10
.65.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.66.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Oak
    Tree LP, as borrower, to Fidelity National Title Company,
    as trustee, for the benefit of GMAC Commercial Mortgage Bank, as
    lender
10
.66.2
Multifamily Note in the amount of
    $23,305,026, dated June 21, 2005, from FIT REN Oak
    Tree, LP to GMAC Commercial Mortgage Bank
10
.66.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.67.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated June 21, 2005, by FIT REN Paulin
    Creek LP, as borrower, to Fidelity National
    Title Company, as trustee, for the benefit of GMAC
    Commercial Mortgage Bank, as lender
10
.67.2
Multifamily Note in the amount of
    $40,732,000, dated June 21, 2005, from FIT REN Paulin
    Creek, LP to GMAC Commercial Mortgage Bank
10
.67.3
Exceptions to Non Recourse
    Guaranty, dated June 21, 2005, by Fortress Investment
    Trust II for the benefit of GMAC Commercial Mortgage Bank
10
.68.1
Multifamily Deed of Trust,
    Assignment of Rents, Security Agreement and Fixture Filing
    (California), dated July 22, 2005, by FIT REN Ocean House LP, as
    borrower, to Fidelity National Title Company, as trustee, for
    the benefit of GMAC Commercial Mortgage Bank, as lender
10
.68.2
Multifamily Note in the amount of
    $19,600,000, dated July 22, 2005, from FIT REN Ocean House,
    LP to GMAC Commercial Mortgage Bank
10
.68.3
Exceptions to Non Recourse
    Guaranty, dated July 22, 2005, by Fortress Investment Trust
    II for the benefit of GMAC Commercial Mortgage Bank
21
.1*
Subsidiaries of the registrant
II-22
Exhibit No.
Description
23
.1*
Consent of Skadden, Arps, Slate,
    Meagher & Flom LLP (included in Exhibit 5.1)
23
.2
Consent of Ernst & Young
    LLP
23
.3
Consent of KPMG LLP
24
.1
Powers of Attorney (included on the
    signature pages hereto)
*
To be filed by amendment.
II-23