Moreno Valley Medical Village

Transcription

1 200 E. Beverly Blvd. Suite 200 Montebello, Ca Tel Fax Optiflex Properties & Development LLC is developing advanced medical facilities in the County of Riverside, California. MORENO VALLEY MEDICAL VILLAGE will be 309,441 square feet on approx acres and INDIO MEDICAL VILLAGE will be 92,054 square feet on approx acres. Both projects together comprise a total of 401,495 square feet on approx acres. Moreno Valley Medical Village The Moreno Valley Medical Village is being developed on a site within a one block walking distance across the street from the Riverside County Regional Medical Center ( RCRMC ) Hospital. Riverside County Regional Medical Center RCRMC is a 439 bed county hospital serving the Inland Empire in Southern California. RCRMC is a teaching hospital and is accredited by the Joint Commission for Accreditation of Healthcare Organizations (JCAHO). RCRMC offers training programs for interns, resident doctors, nursing students and allied health professionals.

2 The Moreno Valley Medical Village consists of six buildings plus an attached Urgent Care Center in one of the six buildings. There is a Medical Office Building ( MOB ) consisting of 91,292sf, a Health Education & Wellbeing Center ( HEWC ) of 50,000sf with the attached Urgent Care Facility of an additional 5,000sf, a Skilled Nursing Facility ( SNF ) for patients with medical conditions consisting of 64,534sf, a Skilled Nursing Facility with Special Treatment Program ( SNF/STP ) requirements consisting of 64,215sf, a Memory Care Unit ( Alzheimer s ) of 18,200sf, and a Geriatric ( Senior s ) Psych Unit of 16,200sf. The Medical Office Building will house an Outpatient Surgery Center (10,000sf), a Radiation Cancer Treatment Center which includes space for Clinical Trials (5,000 sq. ft.), a Dialysis Center (7,500sf), a Rehabilitation Facility (10,000sf), a Clinical Laboratory (1,500sf), a Pharmacy (3,000sf), a Dental Laboratory (4,000sf), Physician s offices (35,000sf), a Café/ Restaurant (1,000sf), Administrative Offices (1,000sf) with Common Areas (13,292sf). Buildings share on-grade parking of 210,000 sq. ft. that can accommodate 696 cars. Advance commitments of interest for space in the MOB represent 80% of the total usable square feet. The project is currently in the entitlement phase and is currently estimated by the City to be approximately 60 days from completion of the required zone change and has the full support of the County, the City, RCRMC Hospital and the community. Optiflex Properties and Development, LLC has a signed operating agreement with Legacy Healthcare, a company with forty years experience successfully managing facilities such as Skilled Nursing Facilities ( SNF s) for patients with medical treatment requirements, Skilled Nursing Facilities with the STP licensing designation, Memory Care Units and a Geriatric Psych Unit in the Moreno Valley Medical Village. Optiflex Properties and Development, LLC has a guaranteed twenty-year fee-for-services contract with the County of Riverside which pays for 100 of the 150 beds in the Skilled Nursing Facility with the Special Treatment Program 24/7/365 whether they are filled or not. That contract guarantees the operating revenue per bed starting at $ per day per bed from opening day. There is a provision in the signed contract which calls for annual increases of 4.7% on July 1 st of each subsequent year. Based on a May 2009 third-party appraisal, the land is currently valued at $8.02 per sq. ft. which equals $6,430,000. This project is 90% entitled with only a new zone change required to complete the process, which is anticipated by the City to be within 60 days. Upon completion of the entitlement process, the land value will increase to $23.00 per sq. ft. which equals $18,403,749. Construction, including hard and soft costs, is estimated to be approximately US$87.5 million for all buildings contemplated on the site. Construction is estimated to begin in the third quarter of 2010 and is estimated to take 18 months or less. Upon completion, Moreno Valley Medical Village is estimated to be worth in excess of US$188 million. Financing for the construction (hard and soft costs), that ultimately reverts to permanent take-out financing has already been committed by a firm that manages in excess of

3 US$27 Billion. The commitment is a non-recourse loan with a HUD guarantee. The loan is fully amortized. The interest rate of 7.5% is fixed for 40 yrs. This HUD loan is for all buildings except the Medical Office Building and the Health Education & Wellbeing Center with the Urgent Care Unit attached and will be conventionally financed, fully amortized, with an interest rate of 7.5%, fixed for 30 years. However, our goal is to finance the entire project through a private equity or private lender which will we have estimated will save approximately 15% of the hard construction costs.

4 INDIO MEDICAL VILLAGE JFK Memorial Hospital The Indio Medical Village is being built on a 3.82 acre site within a one block walking distance of the John F. Kennedy Memorial Hospital ( JFK ). Indio Medical Village consists of two connected buildings, a Skilled Nursing Facility for patients with medical treatment requirements and a Skilled Nursing Facility with a Special Treatment Program licensing attachment and with on-grade parking for staff and guests. Optiflex Properties and Development, LLC has a guaranteed twenty-year fee-for-services contract with the County of Riverside to pay for 50 of the 100 beds in the Skilled Nursing Facility with the Special Treatment Program 24/7/365 whether they are filled or not. That contract guarantees the operating revenue per bed starting at $ per day per bed from opening day. There is a provision in the signed contract which calls for annual increases of 4.7% on July 1 st of each subsequent year. This contract guarantees revenue and covers the anticipated debt service plus establishes profitability from the opening day of the facility. Optiflex Properties and Development, LLC has a signed operating agreement with Legacy Healthcare, a company with forty years experience successfully managing facilities such as Skilled Nursing Facilities ( SNF s) for patients with medical treatment requirements, Skilled Nursing Facilities with the STP licensing designation in the Indio Medical Village. The Indio Medical Village project is fully entitled, the infrastructure is completed and fully paid for and this project has been approved by the City of Indio on October 29, The project has the full support of Riverside County, JFK Memorial Hospital and the community. The land is currently valued at $23 per sq. ft. which equals $3,827,182. Construction, including hard and soft costs, is estimated to be approximately US$28 million for the two buildings.

5 Construction will begin in June/July of 2010 and is estimated to take 12 months. Value of the Indio Medical Village is estimated to be worth in excess of US$86 million upon completion of the construction. Financing for construction (hard and soft costs) that ultimately reverts to a permanent take-out loan has already been committed by a lender that manages in excess of US$27 Billion in assets. The commitment is a non-recourse loan with a HUD guarantee. The loan is fully amortized. The interest rate of 7.5% is fixed for 40 yrs. However, our goal is to finance the entire project through a private equity or private lender which will we have estimated will save approximately 15% of the hard construction costs.

6 MORENO VALLEY MEDICAL VILLAGE The following is a breakdown of the buildings and square footage of the proposed acre site in Moreno Valley, California: 1. Medical Office Building - 91,292 square feet a. Out Patient Surgery Center - 10,000sf (RCRMC) b. Cancer Treatment Center - 5,000sf (Beverly Oncology) c. Dialysis Center - 7,500sf (DaVita) d. Rehabilitation Facility - 10,000sf (RCRMC) e. Clinical Laboratory - 1,500sf (Quest Diagnostics) f. Outpatient Pharmacy - 3,000sf (Private Party) g. Dental Laboratory - 4,000sf (SD Dental Labs) h. Physician Offices - 35,000sf (Various) i. Café Restaurant - 1,000sf (Private Party) j. Administration Offices - 1,000sf k. Common Area - 13,292sf 64,534sf (Legacy 2. Skilled Nursing Facility - Healthcare) 3. Skilled Nursing Facility with STP - 64,215sf (Legacy Healthcare) 4. Skilled Nursing with STP Senior - 16,200sf 5. Memory Care - 18,200sf 6. Health Education Wellbeing Center - 55,000sf 7. Urgent Care - 5,000sf 8. Parking (on-grade) - 210,000sf Total Buildings Square Feet - 309,441sf Total Square Feet with Parking - 519,441sf

7 INDIO MEDICAL VILLAGE The following is a breakdown of the buildings and square footage of the proposed 3.82 acre site in Indio, California: 1. Skilled Nursing Facility - 42,399sf (Legacy Healthcare) 2. Skilled Nursing Facility with STP - 49,655sf (Legacy Healthcare) 3. Parking, Roads (on-grade) - 54,702sf Total Buildings Square Feet - 92,054sf Total Square Feet with Parking - 146,756sf

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11 MORENO VALLEY MEDICAL VILLAGE

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13 Trust Mortgage Company, Inc. - 7 Lehigh Road - Wellesley, MA Tel: info@trustlender.com August 29, 2009 Mr. Willard Bill Novodor Optiflex Properties 200 E. Beverly Blvd., Suite 200 Montebello, CA Re: Moreno SNF and STP Health Care Facilities Dear Mr. Novodor: This letter will confirm our commitment (Trust Mortgage Company, Inc. and its affiliates) to finance the above captioned property based on the rates and terms outlined in the FHA 232 Lean Program and through our successors and assigns and based on our quotation dated February 4, 2009, and relying on the foregoing and other matters set forth herein and other statements, representations furnished and made by Borrower or its representatives, and subject to the approval by the Lender and Lender s counsel and of all documents to be prepared and/or delivered incidental to the making of the Loan, including but not limited to the Loan Documents. This commitment is for a gross loan of $57,939,000 funded by the sale of the mortgage commitment, investor participation or any other means acceptable to the US Department of Housing and Urban Development. This commitment is based on the following items being acceptable, in both our sole opinions, the US Department of HUD, the lender and the opinion of counsel: 1. Amount, Interest Rate, Pre-Payments, and Term: In accordance with market conditions at the time a rate is locked and as determined by The US Department of HUD 2. Loan Documents: Loan shall be evidenced by Borrower s negotiable promissory note or notes in form and substance satisfactory to FHA of the US Department of HUD and Lender s Counsel secured by mortgage or deed of trust and a security agreement in form and substance satisfactory to Lender and Lender s Counsel so as to create a valid, first and prior lien on the property. 3. Place of Closing: to be determined by The US Department of HUD. 4. Conditions Precedent to Closing: There shall be no conditions precedent to Borrower s obligations to accept and close the Loan if said Loan is offered by Lender to Borrower in accordance with the terms hereof. Lender shall not be obligated to make and close the Loan unless each and all of the conditions

14 precedent Lender may require have been fully and timely satisfied as will be outlined by HUD and Lender s counsel. 5. Payment of third Party Fees and Expenses: Borrower s acceptance hereof shall constitute its agreement to pay, at or prior to the Closing Date, all reasonable, documented charges and fees incurred by Borrower and/or Lender in connection with the Loan. 6. Commitment Fee: Concurrently with the Borrower s acceptance of the final Commitment Letter from HUD to insure the mortgage, Borrower shall pay to Lender a Commitment fee equal to the placement and finance fee as allowed by HUD (the Commitment Fee) payable to the order of Lender. This commitment is subject to The US Department of HUD, its rules and regulations for the 232 Lean Program and neither this commitment, nor any part thereof, shall violate any rules or regulations of The US Department of HUD or either the entire commitment or any part thereof is null and void without penalty to either party. Sincerely, Trust Mortgage Company, Inc. John Panagako President JPP/scf

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17 Brodiaea Avenue RESTRICTED IC SERV D E AN PA G RKIN ACCESS/GATE RESIDENT WALKING PATH, GOLF CART PATH AND 2 3a EMERGENCY VEHICLE ACCESS DELIVERY GATE 3b SCRN'D GATE SERVICE/ WALL & 1 DROP-OFF DROP-OFF PARKING PARKING OR OR ZONE ONE WAY GATE GATE SCREENED VILLAGE MAIN STREET WALL & Nason Street ENTRY GATE MONUMENTS ZONE SERVICE/ DELIVERY 5 BASKETBALL COURT 4 WALL OR SCREENED METAL FENCING RESTRICTED SERVICE AND PARKING ACCESS/GATE Building Legend 1 Skilled Nursing Building 2 Assisted Living Building 3a Adult Day Health Care Center 3b Urgent Care Center 4 Medical Office Building 5 Mental Health Building Windmill Lane Overall Site Plan - Scheme C north E. Hospital Rd WAYNE C. SIU ARCHITECTS Architecture and Planning 201 North Brea Blvd., Suite A Brea, California Telephone: (714) (714) wcsaia@pacbell.net Facsimile:

18 Brodiaea Avenue RESTRICTED ING PARK AND ICE SERV ACCESS/GATE RESIDENT WALKING PATH, GOLF CART PATH AND 2 3a EMERGENCY VEHICLE ACCESS DELIVERY GATE 3b WALL & SERVICE/ SCRN'D GATE 1 DROP-OFF DROP-OFF PARKING PARKING OR OR ZONE ONE WAY GATE GATE SCREENED VILLAGE MAIN STREET WALL & Nason Street ENTRY GATE MONUMENTS ZONE SERVICE/ DELIVERY 5 BASKETBALL COURT 4 WALL OR SCREENED METAL FENCING Riverside County Regional Medical Center SERVICE AND PARKING RESTRICTED ACCESS/GATE E. Hospital Rd Anthony Place Building Legend 1 Skilled Nursing Building 2 Assisted Living Building 3a Adult Day Health Care Center 3b Urgent Care Center 4 Medical Office Building 5 Mental Health Building Windmill Lane Overall Site Plan - Scheme C WAYNE C. SIU ARCHITECTS Architecture and Planning 201 North Brea Blvd., Suite A Brea, California Telephone: (714) (714) wcsaia@pacbell.net Facsimile: Cactus Ave Cactus Ave north

19 Moreno Valley Medical Village Overview created PAGE 1 Buildings (Shell Only) Construction Cost Cost Beds Sq. Ft. Cost per Sq. Ft. % of Cost Notes Skilled Nursing ("SNF") with Special Treatment Program ("STP") 11,237, ,215 $ % Skilled Nursing 11,293, ,534 $ % Skilled Nursing STP Senior 2,835, ,200 $ % Skilled Nursing Memory Care 3,185, ,200 $ % Health Education & Wellbeing Center ("HEWC") 6,250,000 n/a 50,000 $ % Urgent Care 625,000 n/a 5,000 $ % Medical Office Building ("MOB") 11,867,960 n/a 91,292 $ % Ave. Cost per sq ft (shell only) Buildings (Shell Only) Cost Subtotal 47,294, , % $ Construction Cost of Common Areas Sq. Ft. Cost per Sq. Ft. Site Preparation and Site Development 2,900, ,165 $3.62 Grading, Sewer, Utilities, Curbs/Gutters Landscaping 973, ,000 $5.02 Area of Project Requiring Landscaping Parking 4,200, ,000 $20.00 Surface Area of Parking Lot (on-grade) Common Areas Cost Subtotal 8,073,000 Total 55,367,035 Allocations of Common Area Cost Based on Usage Sq. Ft. Cost per Sq. Ft. % of Usage Parking Spaces Skilled Nursing ("SNF") with Special Treatment Program ("STP") 11,802,735 64,215 $ % 50 Skilled Nursing 11,939,290 64,534 $ % 53 Skilled Nursing STP Senior 2,996,460 16,200 $ % 13 Skilled Nursing Memory Care 3,265,730 18,200 $ % 9 Health Education & Wellbeing Center ("HEWC") 8,510,440 50,000 $ % 194 Urgent Care 867,190 5,000 $ % 22 Medical Office Building ("MOB") 15,985,190 91,292 $ % 355 Ave. Cost per sq ft (shell+common) Total Shell Cost with Common Areas 55,367, , % 696 $ Tenant Improvement Allowances ("TI") TI Costs Sq. Ft. Cost per Sq. Ft. Skilled Nursing ("SNF") with Special Treatment Program ("STP") 1,605,375 64,215 $25.00 Skilled Nursing 1,936,020 64,534 $30.00 Skilled Nursing STP Senior 486,000 16,200 $30.00 Skilled Nursing Memory Care 546,000 18,200 $30.00 Health Education & Wellbeing Center ("HEWC") 2,500,000 50,000 $50.00 Urgent Care 250,000 5,000 $50.00 subtotal 7,323, ,149 Medical Office Building ("MOB") % of Bldg % of Cost Outpatient Surgery Center 2,500,000 10,000 $ % 41% Cancer Treatment Center w/clinical Trials 660,000 5,000 $ % 11% Dialysis Center 375,000 7,500 $ % 6% Rehab Facility 500,000 10,000 $ % 8% Laboratory 52,500 1,500 $ % 1% Outpatient Pharmacy 105,000 3,000 $ % 2% Dental Laboratory 140,000 4,000 $ % 2% Physicians Offices 1,750,000 35,000 $ % 28% Café Restaurant 50,000 1,000 $ % 1% Admin Offices/Restrooms 25,000 1,000 $ % 0% Common Areas 0 13,292 $ % 0% subtotal 6,157,500 91, % 100% Total Tenant Improvement Allowances 13,480, ,441

20 Buildings Costs (Shell+Common Areas+TI ) Beds Cost per Bed Skilled Nursing ("SNF") with Special Treatment Program ("STP") 13,408, ,387 Skilled Nursing 13,875, ,818 Skilled Nursing STP Senior 3,482, ,298 Skilled Nursing Memory Care 3,811, ,469 Health Education & Wellbeing Center ("HEWC") 11,010,440 n/a n/a Urgent Care 1,117,190 n/a n/a Medical Office Building ("MOB") 22,142,690 n/a n/a Ave. Cost per sq ft (incl. shell/common/ti) Total Buildings Costs (Shell+Common Areas+TI ) 68,847,930 $ PAGE 2 Project Costs Land Purchase 2,250,000 Architect 1,500,000 Total Construction Cost for entire Medical Village 68,847,930 Engineering fees 588,000 Constr. Mgmt. 5% 3,442,397 Architect, Engineering, Mgmt, Developer, Permits 12,211,272 (details here in box to the right ) Developer 3% 2,065,438 subtotal 83,309,202 5% Contingency 4,165,460 Mgmt fees 3% 2,065,438 Permits/OSHPD 2,550,000 Ave. Cost per sq ft (incl. all costs) TOTAL PROJECT COST $87,474, $ ,211,272 Estimated Value Upon Completion and Stabilization Valuation Profit $100,747, LOANS Interest Monthly Annual ROI 115.2% HUD Guaranteed All SNFs plus Urgent Care Total Medical Village Value (Based on Cash Flow) $188,222, Cap Rate 11.0% $57,939, % $381, $4,575, yr Amort. - 90% Cost Value Per SF $ Conventional HEWC and MOB $29,535, % $206, $2,478, yr Amort. - 70% LTV ANNUAL REVENUES AND EXPENSES SUMMARY Net Lease Revenues (HEWC, Urgent Care, MOB) 5,694,900 (details on page 3 of financials) Total 587,797 7,053,567 Net Operating Income from All Skilled Nursing Facilities 15,129,589 (details on page 4 of financials) Property Management (entire Medical Village) (120,000) (details here in box to the right ) Admin Exp. Net Revenues (Before Debt Service) $20,704, Property Mgmt $10, $120, mgmt of entire village Debt Service (7,053,567) (details here in box to the right ) Net Revenues (Pre-Tax) $13,650,922.69

21 DETAILS OF REVENUES FROM LEASED BUILDINGS PAGE 3 Lease Rates/Revenues (TRIPLE NET) Sq Ft Lease Rate/Mo Lease Rate/Yr Monthly Revenues Annual Revenues Health Education & Wellbeing Center ("HEWC") 50,000 $2.25 $27.00 $112, $1,350, Urgent Care 5,000 $2.25 $27.00 $11, $135, Medical Office Bldg ("MOB") Tenant Improvements included Outpatient Surgery Center 10,000 $14.00 $ $140, $1,680, TIs included Cancer Treatment Center w/clinical Trials 5,000 $5.50 $66.00 $27, $330, " Dialysis Center 7,500 $3.50 $42.00 $26, $315, " Rehab Facility 10,000 $2.95 $35.40 $29, $354, " Laboratory 1,500 $2.25 $27.00 $3, $40, " Outpatient Pharmacy 3,000 $5.00 $60.00 $15, $180, " Dental Laboratory 4,000 $2.25 $27.00 $9, $108, " Physicians Offices 35,000 $2.75 $33.00 $96, $1,155, " Café Restaurant 1,000 $3.95 $47.40 $3, $47, " Admin Offices/Restrooms 1,000 $0.00 $0.00 $0.00 $0.00 n/a Common Areas 13,292 $0.00 $0.00 $0.00 $0.00 n/a NET LEASE REVENUES 146,292 $474, $5,694,900.00

22 REVENUE AND EXPENSE DETAILS FOR SNFs 89% OCCUPANCY (except for Guaranteed Beds at 100% occupancy) "PPD" is Per Patient Day PAGE 4 SNF-STP Revenues (150 beds total capacity) Occupied Beds Rev PPD Rev/Day Rev/Mo Rev/Yr 100 beds Guaranteed by Riverside County 100 $ $19, $605, $7,266, beds available for others 45 $ $9, $301, $3,614, Gross Revenues subtotal 145 $29, $906, $10,881, SNF-STP Expenses Exp PPD Exp/Day Exp/Mo Exp/Yr Total beds filled at stabilization 145 $ ($17,835.00) ($542,481.25) ($6,509,775.00) Mgmt Fee 5% of Gross Revenues ($1,490.58) ($45,338.48) ($544,061.70) Expenses subtotal ($19,325.58) ($587,819.73) ($7,053,836.70) TOTAL SNF-STP FACILITY NOI (Pre-Tax) $10, $318, $3,827, SNF Revenues (158 beds total capacity) 89% of Beds Rev PPD Rev/Day Rev/Mo Rev/Yr Gross Revenues 141 $ $56, $1,715, $20,586, SNF Expenses Exp PPD Exp/Day Exp/Mo Exp/Yr Total beds filled at stabilization 141 $ ($25,803.00) ($784,841.25) ($9,418,095.00) Mgmt Fee 5% of Gross Revenues ($2,820.00) ($85,775.00) ($1,029,300.00) Expenses subtotal ($28,623.00) ($870,616.25) ($10,447,395.00) TOTAL SNF Facility NOI (Pre-Tax) $27, $844, $10,138, SNF-STP SENIOR (25 beds total capacity) 89% of Beds Rev PPD Rev/Day Rev/Mo Rev/Yr Gross Revenues 22 $ $4, $133, $1,598, SNF-STP SENIOR Expenses Exp PPD Exp/Day Exp/Mo Exp/Yr Total beds filled at stabilization 22 $ ($2,376.00) ($72,270.00) ($867,240.00) Mgmt Fee 5% of gross revenues ($218.99) ($6,660.89) ($79,930.62) Expenses subtotal ($2,594.99) ($78,930.89) ($947,170.62) TOTAL SNF STP SENIOR NOI (Pre-Tax) $1, $54, $651, MEMORY CARE (25 beds total capacity) 89% of Beds Rev PPD Rev/Day Rev/Mo Rev/Yr Gross Revenues 22 $ $3, $120, $1,451, Expenses Exp PPD Exp/Day Exp/Mo Exp/Yr Total beds filled at stabilization 22 $ ($2,376.00) ($72,270.00) ($867,240.00) Mgmt Fee 5% of gross revenues ($198.90) ($6,049.94) ($72,599.23) Expenses subtotal ($2,574.90) ($78,319.94) ($939,839.23) TOTAL MEMORY CARE NOI (Pre-Tax) $1, $42, $512, ALL SKILLED NURSING FACILITIES COMBINED Per Day Per Month Per Year TOTAL GROSS REVENUES $94, $2,876, $34,517, TOTAL EXPENSES ($53,118.47) ($1,615,686.80) ($19,388,241.55) TOTAL NET OPERATING INCOME (pre-tax) $41, $1,260, $15,129,589.45

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24 Trust Mortgage Company, Inc. - 7 Lehigh Road - Wellesley, MA Tel: info@trustlender.com August 29, 2009 Mr. Willard Bill Novodor Optiflex Properties 200 E. Beverly Blvd., Suite 200 Montebello, CA Re: Indio SNF and STP Health Care Facilities Dear Mr. Novodor: This letter will confirm our commitment (Trust Mortgage Company, Inc. and its affiliates) to finance the above captioned property based on the rates and terms outlined in the FHA 232 Lean Program and through our successors and assigns and based on our quotation dated February 4, 2009, and relying on the foregoing and other matters set forth herein and other statements, representations furnished and made by Borrower or its representatives, and subject to the approval by the Lender and Lender s counsel and of all documents to be prepared and/or delivered incidental to the making of the Loan, including but not limited to the Loan Documents. This commitment is for a gross loan of $20,016,000 funded by the sale of the mortgage commitment, investor participation or any other means acceptable to the US Department of Housing and Urban Development. This commitment is based on the following items being acceptable, in both our sole opinions, the US Department of HUD, the lender and the opinion of counsel: 1. Amount, Interest Rate, Pre-Payments, and Term: In accordance with market conditions at the time a rate is locked and as determined by The US Department of HUD 2. Loan Documents: Loan shall be evidenced by Borrower s negotiable promissory note or notes in form and substance satisfactory to FHA of the US Department of HUD and Lender s Counsel secured by mortgage or deed of trust and a security agreement in form and substance satisfactory to Lender and Lender s Counsel so as to create a valid, first and prior lien on the property. 3. Place of Closing: to be determined by The US Department of HUD. 4. Conditions Precedent to Closing: There shall be no conditions precedent to Borrower s obligations to accept and close the Loan if said Loan is offered by Lender to Borrower in accordance with the terms hereof. Lender shall not be obligated to make and close the Loan unless each and all of the conditions

25 precedent Lender may require have been fully and timely satisfied as will be outlined by HUD and Lender s counsel. 5. Payment of third Party Fees and Expenses: Borrower s acceptance hereof shall constitute its agreement to pay, at or prior to the Closing Date, all reasonable, documented charges and fees incurred by Borrower and/or Lender in connection with the Loan. 6. Commitment Fee: Concurrently with the Borrower s acceptance of the final Commitment Letter from HUD to insure the mortgage, Borrower shall pay to Lender a Commitment fee equal to the placement and finance fee as allowed by HUD (the Commitment Fee) payable to the order of Lender. This commitment is subject to The US Department of HUD, its rules and regulations for the 232 Lean Program and neither this commitment, nor any part thereof, shall violate any rules or regulations of The US Department of HUD or either the entire commitment or any part thereof is null and void without penalty to either party. Sincerely, Trust Mortgage Company, Inc. John Panagako President JPP/scf

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32 INDIO MEDICAL VILLAGE Created PAGE 1 Buildings - Shell Only Cost # 0f Beds Size Cost/SF % of Beds Shell Cost/Bed Notes % of cost Skilled Nursing with Special Treatment Program 8,689, ,655 $ % $86, % Skilled Nursing 7,419, ,399 $ % $71, % subtotal 16,109, , % 100.0% COMMON AREAS Site Development 250,000 Ave. Construction Cost per sq ft (shell only) $ Landscaping 258,518 47,912 $5.02 Parking (104 Spaces) Asphalt (parking area and connecting roads) 370,085 47,676 $7.76 Pavers with bands (drop off area and entry area) 17,544 2,528 $6.94 6" depth textured/colored concrete (service area) 34,230 4,498 $7.61 subtotal 421,859 54,702 Ave. Construction Cost per sq ft (incl common) Total 17,039,827 $ TENANT IMPROVEMENT ALLOWANCES TI Costs # 0f Beds Size Cost/SF % of Beds TI Cost per Bed Notes Skilled Nursing with Special Treatment Program 1,241, ,655 $ % $12,414 Skilled Nursing 1,271, ,399 $ % $12,230 Ave. Construction Cost per sq ft (incl common/ti) subtotal 2,513, , % $ PROJECT COSTS Land Purchase 2,305,000 includes $110,000 extra paid to owner during escrow Total Construction Cost for Entire Medical Village (Shell+Common+TIs) 19,553,172 Architect 182,000 Engineering 180,000 Landscaping Design 18,000 Deferred Interest During Construction (int. calc. on 1/2 loan amt. is ave.) 1,152,000 Developer/Management/Construction Management 3,083,271 Ave. Cost per sq ft (incl common/ti/soft costs) subtotal 26,473,443 5% Contingency 1,397,650 $ TOTAL PROJECT COST $27,871,093 Estimated Value Upon Completion and Stabilization Valuation Profit $58,705,978 Loan Amt Interest Rate Monthly Annual ROI 210.6% HUD loan 90% LTC Total Medical Village Value (Based on Cash Flow) $86,577,071 Cap Rate 11.0% $25,133, % $165,396 $1,984,752 Loan Pymt Value per SF $ $5,000 $60,000 Admin Exp Equity Needed $170,396 $2,044,752 ANNUAL REVENUE AND EXPENSES SUMMARY $2,737,609 Net Operating Income from All Skilled Nursing Facilities 9,523,478 (see details on page 2) Debt Service and Property Management (entire Medical Village) (2,044,752) Net Revenues (pre-tax) $7,478,726

33 REVENUE AND EXPENSE DETAILS 89% OCCUPANCY "PPD" is Per Patient Day SNF-STP Beds 100 beds total capacity Beds Rev PPD Rev/Day Rev/Mo Rev/Yr 50 beds guaranteed by Riverside County 50 $ $9, $302, $3,633, beds sold to others 45 $ $9, $301, $3,614, subtotal 95 $19, $604, $7,248, PAGE 2 Expenses Beds Exp PPD Exp/Day Exp/Mo Exp/Yr Total beds filled at stabilization 95 $ ($11,685.00) ($355,418.75) ($4,265,025.00) Mgmt Fee 5% of gross revenues ($992.88) ($30,200.10) ($362,401.20) subtotal ($12,677.88) ($385,618.85) ($4,627,426.20) TOTAL SNF-STP Facility NOI $7, $218, $2,620, SNF Beds 104 beds total capacity 89% OCCUPANCY Beds Rev PPD Rev/Day Rev/Mo Rev/Yr 104 beds 96 $ $38, $1,168, $14,016, Expenses Beds Exp PPD Exp/Day Exp/Mo Exp/Yr Total beds filled at stabilization 96 $ ($17,568.00) ($534,360.00) ($6,412,320.00) Mgmt Fee 5% of gross revenues ($1,920.00) ($58,400.00) ($700,800.00) subtotal ($19,488.00) ($592,760.00) ($7,113,120.00) TOTAL SNF Facility NOI $18, $575, $6,902, ALL SKILLED NURSING FACILITIES COMBINED Per Day Per Month Per Year TOTAL GROSS REVENUES $58,258 $1,772,002 $21,264,024 TOTAL EXPENSES ($32,166) ($978,379) ($11,740,546) TOTAL NET OPERATING INCOME (pre-tax) $26,092 $793,623 $9,523,478