Fill and Sign the Utilization by a Reit of Partnership Structures in Financing Five Form

§24.812 Utilization by a REIT of partnership structures in financing five development projects Partnership Financings The Company utilized partnership structures in financing the five development projects described below. While the Company provided the financing for each partnership through both direct loans and credit enhancements, the Manager served as a general partner in each partnership in order to monitor and manage the affairs of the partnerships and the development and operations of the projects. The structures also facilitated industrial development bond financing in four of the projects and credit enhancements were provided in the form of the Company’s agreement to purchase the facilities or the bonds in the event of default by the partnerships. Over time, the Company has made commitments to provide working capital loans to these related partnerships. Some of the working capital loan commitments have expired. As of December 31, 1991, the Company had loaned $5,473,400 of working capital to three of these partnerships and was obligated to make working capital loans aggregating $5,615,300. The Company has contingent obligations under the agreements to purchase which currently total $21,790,000. In return for its loans or credit, the Company has a contractual right to receive interest, loan and commitment fees and agreement to purchase fees at levels that the Company believes arc generally at or above market levels. Moreover, because of the developmental nature of these projects, the Company has the right to receive a portion of the proceeds from a sale or refinancing of the projects. The following table presents certain information relating to each of the five projects, including a summary of the fees and benefits to the Manager and the involvement of other Company affiliates. Projects Status Financing Manger’s Participation Involvement of Other Affiliates West Park Place Limited Partnership 205- unit retirement center Toledo, Ohio Completed and approximately 88% occupied Provided by Company: $2,194,367 Mortgage Working Capital Loan was repaid to the Company in 1987; since April 1987, the Company has provided a variety of Mortgage Working Capital and Short Term Loans, the maximum advanced was $368,000 and at February 29, 1992, $0 was outstanding. The Company Project Development Fee of $40,000; Annual Fee of $5,000; Deficit Guarantee Fee of $12,500 over four years. .5% of profits, losses and cash flow until the limited partners have received certain cash distributions; thereafter 6.25% of profits, losses Affiliates of Bruce Douglas, Director of the Company, serve as general partner and served as general contractor. provided construction loans for Phases I and II of the project which were converted into permanent loans. Subsequently, these loans, which currently aggregate $10,447.192, were restructured to include, among other things, a reduction in the interest rate from 16% to 3% over prime with a base rate of 12%, which base rate increases 1% each year thereafter until 16%. and cash flow; 12.5% of net proceeds from sale of refinancing after the limited partners have received certain cash contributions. Independence Village Associates, Ltd. 160-unit retirement center Naperville, Illinois Completed and approximately 78% occupied Provided by Company; $1,563,192 Mortgage Working Capital Loan - $1,472,254 advanced at February 29, 1992. The Company has an open-ended commitment to loan 60% of the additional cash requirements in excess of the Mortgage Working Capital Loan - $312,000 advanced at February 29, 1992. $5,800,000 of industrial development bonds, secured by bank letter of credit, in turn secured by Company’s agreement to purchase. Organizational Fee of $20,000 and Annual Fee of $10,000. 6% of profits and losses; 5% of cash flow; 6% of net capital proceeds from sale or refinancing. Frederic D. Wolfe and Bruce G. Thompson are two of the six limited partners Landver Properties, Ltd. Two 100-bed nursing facilities Ashland, Ohio Vermilion, Ohio Completed and approximately 94% occupied Provided by Company; $1,125,000 Working Capital Loan advanced by the Company was repaid in July 1987. $4,540 of industrial development bonds secured by project and Company’s agreement Initial Management Fee of $20,000 and Annual Management Fee of $10,000. Deficit Guarantee Fee of $120,000. 1.5% of profits Affiliate of Richard A. Unverferth, a Director of the Company, managed the homes thorugh June 30, 1989. Fees for 1989 totalled $163,208. to purchase. and losses; 30% of cash flow after the limited partners h ave received a preferential cash distribution equal to 8% of their cumulative capital contributions. 65.8% of general partners’ net capital proceeds from sale or refinancing. Messrs. Wolfe and Thompson are two of the ten limited partners. An affiliate of Messrs. Wolfe and Thompson has managed the homes since July 1, 1989. Fees for 1990 and 1991 totalled $279,453 and $320,745, respectively. WT Management Company and Kingston HealthCare Company (formerly WTR Corp) In 1987 and 1988, respectively, the Company contracted with WI Management Company (“WI”), a company wholly-owned by Messrs. Wolfe and Thompson, to manage a nursing home in Camp Verde, Arizona and three facilities in Indiana. All four facilities had been relinquished to the Company by their previous owners, due to, among other reasons, various loan, lease and bond defaults. In 1989, Landver Properties, Ltd., a related party, contracted with WT to manage two nursing homes in Ashland and Vermilion, Ohio. In 1990, the facilities were managed by either WT or Kingston HealthCare Company (“Kingston,” but then named WTR Corp), a company principally owned by Messrs. Wolfe and Thompson. During 1990, two of the Indiana facilities, a nursing home and a retirement center, were leased to Kingston with options to purchase. Kingston has exercised an option to purchase one of the facilities. Total management fees to WT and Kingston aggregated $217,355 in 1990 and $58,519 in 1991. It is possible that the Company will contract with WT or Kingston in the future to manage and/or lease facilities. Other Gregory G. Alexander, a Director of the Company, is a Partner in the law firm of Shumaker, Loop & Kendrick, which the Company retains with respect to various legal matters. Pier C. Borra, a Director of the Company, is Chairman, President and Chief Executive Officer of Arbor Health Care Company. The Company provides financing to Arbor for one facility in the amount of $5,275,000. George Chopivsky, Jr., a Director of the Company, and his affiliates have interests in two psychiatric hospitals that the Company is financing or has committed to finance for an aggregate amount of $12,000,000. Furthermore, the Company is also providing financing for two nursing rehabilitation homes in the aggregate amount of $17,122,190 for an entity in which an affiliate of Mr. Chopivsky has an appropriate 3% interest. Bruce G. Thompson, Chairman of the Board and a Director of the Company, is a director of Society Bank & Trust, with which the Company has a line of credit. Frederic D. Wolfe, President and a Director of the Company, is a director of Ohio Citizens Bank, which Bank is a participant in the Company’s revolving line of credit. Ohio Citizens Bank is an affiliate of National City Bank, of Cleveland, Ohio, which is agent for, and participant in, the Company’s revolving line of credit. All of the related party matters were approved by a majority of Directors unaffiliated with the transactions. General For the years ended December 31, 1991, 1990 and 1989, gross income from related aggregated approximately $4,903,000, $3,008,000 and $3,173,000 or 16.8%, 11.2% and 11.9%, respectively, of the gross income of the Company. The gross income from related parties does not include income attributable from an entity in which an affiliate of Mr. Chopivsky has an approximate 3% interest. The 1991 increase in the percentage of gross income from related parties over 1990 was partially a result of the election of Mr. Borra as a Director.Health Care REIT, Inc. 4/21/92