10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission file number 1-9028

NATIONWIDE HEALTH PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Maryland	95-3997619
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
610 Newport Center Drive, Suite 1150 Newport Beach, California	92660
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 718-4400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.10 Par Value	New York Stock Exchange
Series B Cumulative Convertible Preferred Stock, $1.00 Par Value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x	Accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a small reporting company)	Small reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ¨    No  x

As of June 30, 2008, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $2,993,577,000 based on the closing sale price as reported on the New York Stock Exchange.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at February 17, 2009
Common Stock, $0.10 par value per share	102,353,721 shares

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Proxy Statement for the Annual Meeting of Stockholders to be held on May 5, 2009 (Proxy Statement)	Part III

NATIONWIDE HEALTH PROPERTIES, INC.

FORM 10-K

December 31, 2008

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	30
Item 2.	Properties	30
Item 3.	Legal Proceedings	30
Item 4.	Submission of Matters to a Vote of Security Holders	30
PART II
Item 5.	Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	31
Item 6.	Selected Financial Data	33
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 8.	Financial Statements and Supplementary Data	53
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	119
Item 9A.	Controls and Procedures	119
PART III
Item 9B.	Other Information	121
Item 10.	Directors, Executive Officers and Corporate Governance	121
Item 11.	Executive Compensation	121
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	121
Item 13.	Certain Relationships and Related Transactions, and Director Independence	121
Item 14.	Principal Accountant Fees and Services	121
PART IV
Item 15.	Exhibits and Financial Statement Schedules	122
	Signatures	127

PART I

Item 1. Business.

General

Nationwide Health Properties, Inc., a Maryland corporation incorporated on October 14, 1985, is a real estate investment trust (“REIT”) that invests primarily in healthcare related senior housing, long-term care properties and medical office buildings. Whenever we refer herein to “NHP” or to “us” or use the terms “we” or “our,” we are referring to Nationwide Health Properties, Inc. and its subsidiaries, unless the context otherwise requires.

Our operations are organized into two segments – triple-net leases and multi-tenant leases. In the triple-net leases segment, we invest in healthcare related properties and lease the facilities to unaffiliated tenants under “triple-net” and generally “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In the multi-tenant leases segment, we invest in healthcare related properties that have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). As of December 31, 2008, the multi-tenant leases segment was comprised exclusively of medical office buildings. We did not invest in multi-tenant leases prior to 2006. In addition, but to a much lesser extent because we view the risks of this activity to be greater due to less favorable bankruptcy treatment and other factors, from time to time, we extend mortgage loans and other financing to tenants. For the twelve months ended December 31, 2008, approximately 93% of our revenues are derived from our leases, with the remaining 7% from our mortgage loans and other financing activities.

As of December 31, 2008, we had investments in 583 healthcare facilities and one land parcel located in 43 states, consisting of:

Consolidated facilities:

• 251 assisted and independent living facilities;

• 172 skilled nursing facilities;

• 10 continuing care retirement communities;

• 7 specialty hospitals;

• 19 triple-net medical office buildings, one of which is operated by a consolidated joint venture;

• 60 multi-tenant medical office buildings, 51 of which are operated by consolidated joint ventures; and

• 1 asset held for sale.

Unconsolidated facilities:

• 19 assisted and independent living facilities;

• 14 skilled nursing facilities;

• 1 continuing care retirement community; and

• 2 multi-tenant medical office buildings.

Mortgage loans secured by:

• 17 skilled nursing facilities;

• 9 assisted and independent living facilities;

• 1 medical office building; and

• 1 land parcel.

1

As of December 31, 2008, our directly owned facilities, other than our multi-tenant medical office buildings, most of which are operated by our consolidated joint ventures, were operated by 84 different healthcare providers, including the following publicly traded companies:

	Number of Facilities Operated
•      Assisted Living Concepts, Inc.	4
•      Brookdale Senior Living, Inc.	96
•      Emeritus Corporation	6
•      Extendicare, Inc.	1
•      HEALTHSOUTH Corporation	2
•      Kindred Healthcare, Inc.	1
•      Sun Healthcare Group, Inc.	4

Two of our triple-net lease tenants, Brookdale Senior Living, Inc. (“Brookdale”) and Hearthstone Senior Services, L.P. (“Hearthstone”) each accounted for more than 10% of our revenues at December 31, 2008 and both may account for more than 10% of our revenues in 2009.

The following table summarizes our top five tenants, the number of facilities each operates and the percentage of our revenues received from each of these tenants as of the end of 2008, as adjusted for facilities acquired and disposed of during 2008:

Tenant	Number of Facilities Operated	Percentage of Revenue
Brookdale Senior Living, Inc.	96	15.2	%
Hearthstone Senior Services, L.P.	32	10.6	%
Wingate Healthcare, Inc.	19	6.1	%
Beverly Enterprises	28	4.3	%
Atria Senior Living Group	10	4.1	%

Our leases have fixed initial rent amounts and generally contain annual escalators. Most of our leases contain non-contingent rent escalators for which we recognize income on a straight-line basis over the lease term. Certain leases contain escalators contingent on revenues or other factors, including increases based on changes in the Consumer Price Index. Such revenue increases are recognized over the lease term as the related contingencies occur. However, since the Consumer Price Index has recently trended negatively, we are likely to see much less, if any, internal growth from these rent escalators as long as deflationary conditions continue. We assess the collectibility of our rent receivables and we reserve against the receivable balances for any amounts that may not be recovered.

Our triple-net leased facilities are generally leased under triple-net leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. Approximately 84% of these facilities are leased under master leases. In addition, the majority of these leases contain cross-collateralization and cross-default provisions tied to other leases with the same tenant, as well as grouped lease renewals and grouped purchase options. Leases covering 424 facilities are backed by security deposits consisting of irrevocable letters of credit or cash totaling $72.7 million. Leases covering 339 facilities contain provisions for property tax impounds, and leases covering 210 facilities contain provisions for capital expenditure impounds. Our multi-tenant facilities generally have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants).

2

2008 Investment Activities

In February 2008, we entered into an agreement with Pacific Medical Buildings LLC (“PMB”) and certain of its affiliates to acquire up to 18 medical office buildings, including six that are currently in development, for $747.6 million, including the assumption of approximately $282.6 million of mortgage financing. In April 2008, we formed NHP/PMB L.P. (“NHP/PMB”), a limited partnership, to acquire properties from entities affiliated with PMB. During 2008, NHP/PMB acquired PMB’s affiliates’ interests in nine of the 18 medical office buildings, including one property which is included in our triple-net leases segment and eight properties which are multi-tenant medical office buildings (one of which consisted of a 50% interest through a joint venture which is consolidated by NHP/PMB), for $232.2 million, including acquisition costs, which was paid in a combination of cash, the assumption of $120.8 million of mortgage financing and the issuance of 1,829,562 limited partnership units with a fair value at the date of issuance of $58.4 million. During 2008, we also acquired one of the 18 medical office buildings directly (not through NHP/PMB) for $14.7 million, including acquisition costs. Pursuant to the agreement with PMB, certain conditions must be met in order for us to be obligated to purchase the seven remaining medical office buildings. We recently elected to terminate the agreement with respect to one property after the conditions requiring us to close on such property were not met.

Additionally, we entered into another agreement with PMB pursuant to which we currently have the right, but not the obligation, to acquire up to approximately $1 billion of multi-tenant medical office buildings developed by PMB through April 2016.

During 2008, we acquired 18 assisted and independent living facilities, 11 skilled nursing facilities and 12 medical office buildings subject to triple-net master leases in 12 separate transactions for an aggregate investment of $163.0 million. We also funded $43.4 million in expansions, construction and capital improvements at certain facilities in accordance with existing lease provisions. Such expansions, construction and capital improvements generally result in an increase in the minimum rents earned by us on these facilities either at the time of funding or upon completion of the project.

During 2008, we acquired, out of bankruptcy, title to one skilled nursing facility securing a previously impaired mortgage loan with a net book value of $2.9 million which approximated our estimate of fair value of the facility and was allocated to land and building. Concurrent with acquiring title to the facility, we entered into a lease for this facility with a third party who was one of our existing tenants.

During 2008, we acquired the final multi-tenant medical office building of a seven building portfolio through our joint venture with McShane for $2.0 million. We also funded $2.1 million in capital improvements at certain facilities through our joint ventures with McShane and Broe.

During 2008, we also acquired, from an entity affiliated with PMB, a 44.95% investment in two multi-tenant medical office buildings for $3.5 million through PMB SB 399-401 East Highland LLC (“PMB SB”), an unconsolidated joint venture. Additionally, through our unconsolidated joint venture with a state pension fund, we exercised a purchase option of $21.8 million on one assisted and independent living facility and one skilled nursing facility in which the joint venture previously had leasehold interests. In connection with the purchase option exercise, the joint venture assumed $19.5 million of mortgage financing.

During 2008, we funded one mortgage loan secured by one skilled nursing facility in the amount of $6.8 million and one mortgage loan secured by one medical office building in the amount of $47.5 million. We also funded an additional $0.8 million on existing mortgage loans.

At December 31, 2008, we held 15 mortgage loans receivable secured by 17 skilled nursing facilities, nine assisted and independent living facilities, one medical office building and one land parcel. The mortgage loans receivable had an aggregate principal balance of $179.2 million which is reduced by aggregate deferred gains and discounts totaling $19.3 million, for a net book value of $159.9 million. The mortgage loans have individual outstanding balances ranging from $0.7 million to $47.5 million and maturities ranging from 2009 to 2024.

3

Taxation

We believe we have operated in such a manner as to qualify for taxation as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and we intend to continue to operate in such a manner. If we qualify for taxation as a REIT, we will generally not be subject to federal corporate income taxes on our net income that is currently distributed to stockholders. This treatment substantially eliminates the “double taxation”, that is, at the corporate and stockholder levels, that usually results from investment in the stock of a corporation. Please see the risk factors found under the heading “Risks Related to Our Taxation as a REIT” under the caption “Risk Factors” for more information.

Objectives and Policies

We are organized to invest in income-producing healthcare related facilities. At December 31, 2008, we had investments in 583 facilities located in 43 states, and we plan to invest in additional healthcare properties in the United States. Other than potentially utilizing joint ventures, we do not intend to invest in securities of, or interests in, persons engaged in real estate activities or to invest in securities of other issuers for the purpose of exercising control.

In evaluating potential investments, we consider such factors as:

• The geographic area, type of property and demographic profile;

• The location, construction quality, condition and design of the property;

• The expertise and reputation of the operator;

• The current and anticipated cash flow and its adequacy to meet operational needs and lease obligations;

• Whether the anticipated rent provides a competitive market return to NHP;

• The potential for capital appreciation;

• The tax laws related to real estate investment trusts;

• The regulatory and reimbursement environment in which the properties operate;

• Occupancy and demand for similar healthcare facilities in the same or nearby communities; and

• An appropriate mix between private and government sponsored patients.

There are no limitations on the percentage of our total assets that may be invested in any one property. The Investment Committee of the board of directors or the board of directors may establish limitations as it deems appropriate from time to time. No limits have been set on the number of properties in which we will seek to invest, or on the concentration of investments in any one facility type or any geographic area. From time to time we may sell properties; however, we do not intend to engage in the purchase and sale, or turnover, of investments. We acquire our investments primarily for long-term income.

At December 31, 2008, we had one series of preferred stock with a liquidation preference totaling $74.9 million and $1.5 billion of indebtedness that is senior to our common stock. We may, in the future, issue additional debt or equity securities that will be senior to our common stock. During the past five years we have issued one series of preferred stock senior to our common stock, and while we do not have immediate plans to issue additional equity securities senior to our common stock, we may do so in the future.

In certain circumstances, we may make mortgage loans with respect to certain facilities secured by those facilities. At December 31, 2008, we held 15 mortgage loans secured by 17 skilled nursing facilities, nine assisted and independent living facilities, one medical office building and one land parcel. There are no limitations on the number or the amount of mortgages that may be placed on any one piece of property.

4

We may incur additional indebtedness when, in the opinion of our management and board of directors, it is advisable. For short-term purposes we, from time to time, negotiate lines of credit or arrange for other short-term borrowings from banks or others. We arrange for long-term borrowings through public offerings or private placements to institutional investors.

In addition, we may incur additional mortgage indebtedness on real estate which we have acquired through purchase, foreclosure or otherwise. We may invest in properties subject to existing loans or secured by mortgages, deeds of trust or similar liens on the properties. We also may obtain non-recourse or other mortgage financing on unleveraged properties in which we have invested or may refinance properties acquired on a leveraged basis.

We will not, without the proper approval of a majority of the disinterested directors, acquire from or sell to any director, officer or employee of NHP or any affiliate thereof, as the case may be, any of our assets or other property. We provide to our stockholders annual reports containing audited financial statements and quarterly reports containing unaudited information, which are available upon request.

We do not have plans to underwrite securities of other issuers.

The policies set forth herein have been established by our board of directors and may be changed without stockholder approval.

Properties

Of the 583 facilities in which we have investments, as of December 31, 2008, we have direct ownership of:

• 251 assisted and independent living facilities;

• 172 skilled nursing facilities;

• 10 continuing care retirement communities;

• 7 specialty hospitals;

• 19 triple-net medical office buildings of which one is operated by a consolidated joint venture;

• 60 multi-tenant medical office buildings, 51 of which are operated by consolidated joint ventures; and

• 1 asset held for sale.

We also have indirect ownership of 36 facilities through our unconsolidated joint ventures and have mortgage loans secured by 27 facilities and one land parcel.

Our operations are organized into two segments – triple-net leases and multi-tenant leases. In the triple-net leases segment, we invest in healthcare related properties and lease the facilities to unaffiliated tenants under “triple-net” and generally “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In the multi-tenant leases segment, we invest in healthcare related properties that have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). As of December 31, 2008, the multi-tenant leases segment was comprised exclusively of medical office buildings. See “Note 24—Segment Information” of the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information about our business segments.

5

Triple-net Leases

Our triple-net leases segment includes investments in the following types of facilities:

Senior Housing/Assisted and Independent Living Facilities

Assisted and independent living facilities offer studio, one bedroom and two bedroom apartments on a month-to-month basis primarily to elderly individuals, including those with Alzheimer’s or related dementia, with various levels of assistance requirements. Assisted and independent living residents are provided meals and eat in a central dining area; assisted living residents may also be assisted with some daily living activities with programs and services that allow residents certain conveniences and make it possible for them to live as independently as possible; staff is also available when residents need assistance and for group activities. Services provided to residents who require more assistance with daily living activities, but who do not require the constant supervision skilled nursing facilities provide, include personal supervision and assistance with eating, bathing, grooming and administering medication. Charges for room, board and services are generally paid from private sources.

Long-Term Care/Skilled Nursing Facilities

Skilled nursing facilities provide rehabilitative, restorative, skilled nursing and medical treatment for patients and residents who do not require the high-technology, care-intensive, high-cost setting of an acute care or rehabilitative hospital. Treatment programs include physical, occupational, speech, respiratory and other therapeutic programs, including sub-acute clinical protocols such as wound care and intravenous drug treatment.

Continuing Care Retirement Communities

Continuing care retirement communities provide a broad continuum of care. At the most basic level, independent living residents might receive meal service, maid service or other services as part of their monthly rent. Services which aid in everyday living are provided to other residents, much like in an assisted living facility. At the far end of the spectrum, skilled nursing, rehabilitation and medical treatment are provided to residents who need those services. This type of facility consists of independent living units, dedicated assisted living units and licensed skilled nursing beds on one campus.

Specialty Hospitals

Rehabilitation hospitals provide inpatient and outpatient medical care to patients requiring high intensity physical, respiratory, neurological, orthopedic or other treatment protocols and for intermediate periods in their recovery. These programs are often the most effective in treating severe skeletal or neurological injuries and traumatic diseases such as stroke and acute arthritis.

Long-term acute care hospitals serve medically complex, chronically ill patients. These hospitals have the capability to treat patients who suffer from multiple systemic failures or conditions such as neurological disorders, head injuries, brain stem and spinal cord trauma, cerebral vascular accidents, chemical brain injuries, central nervous system disorders, developmental anomalies and cardiopulmonary disorders. Chronic patients are often dependent on technology for continued life support, such as mechanical ventilators, total parenteral nutrition, respiration or cardiac monitors and dialysis machines. While these patients suffer from conditions that require a high level of monitoring and specialized care, they may not necessitate the continued services of an intensive care unit. Due to their severe medical conditions, these patients generally are not clinically appropriate for admission to a skilled nursing facility or rehabilitation hospital.

Medical Office Buildings

Medical office buildings are typically on or near an acute care hospital campus. They usually house several different unrelated medical practices, although they can be associated with a large single-specialty or multi-specialty group. Tenants include physicians, dentists, psychologists, therapists and other healthcare providers, with space devoted to patient examination and treatment, diagnostic imaging, outpatient surgery and other outpatient services.

6

The following table sets forth certain information regarding our owned triple-net leased facilities as of December 31, 2008:

Facility Location	Number of Facilities	Number of Beds/Units (1)	Square Footage (1)	Gross Real Estate Investment		2008 NOI (2)
				(Dollars in Thousands)
Senior Housing/Assisted and Independent Living Facilities:
Alabama	7	527	—	$	44,840	$	4,013
Arizona	3	236	—		27,056		2,635
Arkansas	1	32	—		2,150		231
California	17	2,090	—		131,598		19,865
Colorado	3	529	—		45,598		6,186
Connecticut	2	215	—		30,141		3,753
Florida	17	1,162	—		102,094		9,863
Georgia	3	293	—		21,053		1,921
Indiana	7	340	—		31,808		2,289
Kansas	6	283	—		16,419		1,837
Maryland	1	60	—		5,570		427
Massachusetts	1	98	—		18,903		1,013
Michigan	13	786	—		93,716		8,508
Minnesota	10	343	—		38,721		3,454
Mississippi	1	52	—		4,682		409
Missouri	4	77	—		1,904		56
Nevada	2	154	—		13,616		1,367
New Jersey	2	104	—		7,616		1,050
New Mexico	1	96	—		22,377		2,042
New York	3	406	—		44,267		5,307
North Carolina	10	582	—		108,773		9,163
North Dakota	1	48	—		6,302		475
Ohio	12	835	—		88,167		8,710
Oklahoma	4	205	—		22,033		2,142
Oregon	6	409	—		30,118		3,267
Pennsylvania	8	386	—		27,616		2,618
Rhode Island	3	274	—		30,290		2,877
South Carolina	3	117	—		8,357		580
South Dakota	4	183	—		21,257		1,899
Tennessee	14	1,398	—		119,281		8,902
Texas	28	2,210	—		289,681		26,616
Virginia	1	74	—		11,210		1,118
Washington	10	907	—		70,832		7,542
West Virginia	1	60	—		6,355		502
Wisconsin	42	2,171	—		180,364		16,412
Subtotals	251	17,742	—		1,724,765		169,049
Long-Term Care/Skilled Nursing Facilities:
Arkansas	9	903	—		38,582		4,171
California	3	342	—		10,444		2,200
Connecticut	3	351	—		17,263		1,359
Florida	4	465	—		15,275		1,658
Georgia	1	100	—		4,342		355
Idaho	1	64	—		792		140

7

Facility Location	Number of Facilities	Number of Beds/Units (1)	Square Footage (1)	Gross Real Estate Investment	2008 NOI (2)
				(Dollars in Thousands)
Illinois	2	210	—	5,549	622
Indiana	24	2,292	—	104,259	7,485
Kansas	6	425	—	11,309	1,331
Maryland	5	872	—	31,195	4,226
Massachusetts	15	2,079	—	174,265	15,664
Minnesota	3	513	—	27,620	2,327
Mississippi	1	120	—	4,467	487
Missouri	12	1,089	—	51,236	5,407
Nevada	1	140	—	4,389	779
New York	3	440	—	57,601	4,985
North Carolina	1	150	—	2,360	355
Ohio	5	733	—	28,458	3,044
Oklahoma	5	235	—	9,122	952
Pennsylvania	3	257	—	14,032	1,772
South Carolina	4	576	—	36,696	3,292
Tennessee	5	494	—	22,002	2,453
Texas	29	3,431	—	107,820	11,215
Utah	1	65	—	2,793	316
Virginia	6	843	—	28,690	3,815
Washington	7	711	—	44,531	4,074
West Virginia	4	326	—	15,143	1,977
Wisconsin	7	673	—	30,192	3,245
Wyoming	2	217	—	11,987	1,179
Subtotals	172	19,116	—	912,414	90,885
Continuing Care Retirement Communities:
Arizona	1	228	—	12,887	1,570
Colorado	1	119	—	3,116	415
Florida	1	225	—	12,043	732
Maine	3	527	—	39,341	3,484
Massachusetts	1	171	—	14,655	1,549
Oklahoma	1	248	—	8,718	685
Tennessee	1	80	—	3,178	409
Texas	1	354	—	30,870	3,596
Subtotals	10	1,952	—	124,808	12,440
Specialty Hospitals:
Arizona	2	116	—	17,071	2,480
California	2	84	—	39,394	3,796
Texas	3	103	—	19,316	1,923
Subtotals	7	303	—	75,781	8,199
Medical Office Buildings:
Alabama	1	—	61,219	16,706	1,133
California	1	—	67,000	24,975	289
Florida	9	—	82,605	35,543	695
Indiana	4	—	55,814	15,724	1,163

8

Facility Location	Number of Facilities	Number of Beds/Units (1)	Square Footage (1)	Gross Real Estate Investment		2008 NOI (2)
				(Dollars in Thousands)
Maryland	1	—	5,538		1,717		34
Michigan	2	—	17,375		5,654		110
Texas	1	—	148,751		22,952		1,401
Subtotals	19	—	438,302		123,271		4,825
Total Owned Triple-Net Leased Facilities	459	39,113	438,302	$	2,961,039	$	285,398

(1) Assisted and independent living facilities are measured in units, continuing care retirement communities are measured in beds and units, skilled nursing facilities and specialty hospitals are measured by bed count and medical office buildings are measured by square footage.

(2) Net operating income (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of our facilities. We define NOI for our triple-net leases segment as rent revenues. For our multi-tenant leases segment, we define NOI as revenues minus medical office building operating expenses. In some cases, revenue for medical office buildings includes expense reimbursements for common area maintenance charges. NOI excludes interest expense and amortization of deferred financing costs, depreciation and amortization expense, general and administrative expense and discontinued operations. We present NOI as it effectively presents our portfolio on a “net” rent basis and provides relevant and useful information as it measures the operating performance at the facility level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. Furthermore, we believe that NOI provides investors relevant and useful information because it measures the operating performance of our real estate at the property level on an unleveraged basis. We believe that net income is the GAAP measure that is most directly comparable to NOI. However, NOI should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes the items described above. Additionally, NOI as presented above may not be comparable to other REITs or companies as their definitions of NOI may differ from ours. See Note 24 to our consolidated financial statements for a reconciliation of net income to NOI.

The following table sets forth certain information regarding average rents for triple-net leased facilities owned by us as of December 31, 2008:

	2008				2007
	Average Annualized Rent per Bed/Unit		Average Annualized Rent per Square Foot		Average Annualized Rent per Bed/Unit		Average Annualized Rent per Square Foot
Senior Housing/Assisted and Independent Living Facilities	$	10,000	$	—	$	9,000	$	—
Long-Term Care/Skilled Nursing Facilities		5,000		—		4,000		—
Continuing Care Retirement Communities		6,000		—		6,000		—
Specialty Hospitals		27,000		—		27,000		—
Medical Office Buildings		—		11.01		—		6.06

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The following table sets forth certain information regarding lease expirations for our owned triple-net leased facilities as of December 31, 2008:

	Assisted & Independent			Skilled Nursing			Continuing Care			Other Triple-Net			Total Owned Triple-Net
	Minimum Rent		Number of Facilities	Minimum Rent		Number of Facilities	Minimum Rent		Number of Facilities	Minimum Rent		Number of Facilities	Minimum Rent		Number of Facilities
	(Dollars in Thousands)
2009	$	701	5	$	—	—	$	—	—	$	—	—	$	701	5
2010		4,671	7		8,297	18		551	1		—	—		13,519	26
2011		—	—		6,389	19		—	—		—	—		6,389	19
2012		7,586	8		4,332	8		1,511	1		1,800	1		15,229	18
2013		11,499	11		5,657	11		363	1		—	—		17,519	23
2014		8,346	12		4,109	8		4,872	3		—	—		17,327	23
2015		1,756	4		3,627	5		—	—		3,231	1		8,614	10
2016		11,046	10		13,235	26		—	—		4,037	6		28,318	42
2017		2,510	9		5,029	15		—	—		1,863	1		9,402	25
2018		1,335	2		2,794	8		—	—		—	—		4,129	10
Thereafter		107,972	184		34,126	54		4,103	4		5,539	17		151,740	259
	$	157,422	252	$	87,595	172	$	11,400	10	$	16,470	26	$	272,887	460

In the triple-net leases segment, facilities are leased to single tenants. Revenues are received by us directly from the tenants in accordance with the lease terms which generally provide for annual rent escalators and transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. While occupancy information is relevant to the operations of the tenant, our revenues are not directly impacted by occupancy levels at the triple-net leased facilities.

Multi-Tenant Leases

As of December 31, 2008, our multi-tenant leases segment is comprised exclusively of medical office buildings.

The following table sets forth certain information regarding our owned multi-tenant leased facilities as of December 31, 2008:

Facility Location	Number of Facilities	Square Footage	Gross Real Estate Investment		2008 NOI (1)
			(Dollars in Thousands)
Medical Office Buildings:
California	6	337,983	$	114,260	$	6,250
Florida	1	37,413		6,350		214
Georgia	3	117,622		7,060		971
Illinois	12	375,194		36,148		5,085
Louisiana	8	393,908		23,675		2,824
Missouri	7	404,604		42,734		4,232
Nevada	2	145,149		38,572		1,271
Ohio	1	66,902		11,463		1,114
Oregon	1	104,856		31,218		1,431
South Carolina	2	109,704		13,153		1,241
Tennessee	1	56,973		3,954		690
Texas	6	157,327		7,433		397
Virginia	3	66,460		5,312		450
Washington	7	363,462		97,842		7,486
Total Owned Multi-Tenant Leased Facilities	60	2,737,557	$	439,174	$	33,656

(1) Net operating income (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of our facilities. We define NOI for our triple-net leases segment as rent revenues. For our multi-tenant leases segment, we define NOI as revenues minus medical office building operating expenses. In some cases, revenue for medical office buildings includes expense reimbursements for common area maintenance charges. NOI excludes interest

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expense and amortization of deferred financing costs, depreciation and amortization expense, general and administrative expense and discontinued operations. We present NOI as it effectively presents our portfolio on a “net” rent basis and provides relevant and useful information as it measures the operating performance at the facility level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. Furthermore, we believe that NOI provides investors relevant and useful information because it measures the operating performance of our real estate at the property level on an unleveraged basis. We believe that net income is the GAAP measure that is most directly comparable to NOI. However, NOI should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes the items described above. Additionally, NOI as presented above may not be comparable to other REITs or companies as their definitions of NOI may differ from ours. See Note 24 to our consolidated financial statements for a reconciliation of net income to NOI.

Average annualized revenue per square foot for our multi-tenant leased medical office buildings owned as of December 31, 2008 was $22.02 per square foot and $8.63 per square foot for 2008 and 2007, respectively.

The following table sets forth certain information regarding lease expirations for our owned multi-tenant leased facilities as of December 31, 2008:

	Minimum Rent		Number of Leases
	(Dollars in Thousands)
2009	$	5,168	133
2010		6,111	146
2011		4,980	107
2012		5,680	92
2013		2,860	58
2014		2,456	17
2015		2,517	18
2016		4,022	17
2017		7,806	83
2018		2,200	18
Thereafter		14,382	26
		$58,182	715

Occupancy for our owned multi-tenant medical office buildings was 90.2% and 90.5% at December 31, 2008 and 2007, respectively.

Competition

We generally compete with other REITs, including HCP, Inc., Health Care REIT, Inc., Healthcare Realty Trust Incorporated, LTC Properties, Inc., Omega Healthcare Investors, Inc., Senior Housing Properties Trust and Ventas, Inc., real estate partnerships, healthcare providers and other investors, including, but not limited to, banks, insurance companies, pension funds, government sponsored entities, including the Department of Housing and Urban Development and Fannie Mae, and opportunity funds, in the acquisition, leasing and financing of healthcare facilities. The tenants that operate our healthcare facilities compete on a local and regional basis with operators of facilities that provide comparable services. Operators compete for patients based on quality of care, reputation, physical appearance of facilities, price, services offered, family preferences, physicians, staff and location. Our medical office buildings compete with other medical office buildings in their surrounding areas for tenants, including physicians, dentists, psychologists, therapists and other healthcare providers.

Regulation

Payments for healthcare services provided by the tenants of our facilities are received principally from four sources: private funds; Medicaid, a medical assistance program for the indigent, operated by individual states with the financial participation of the federal government; Medicare, a federal health insurance program for the aged, certain chronically disabled individuals, and persons with end-stage renal disease; and health and other

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insurance plans. While assisted and independent living facilities and medical office building tenants generally receive private funds, government revenue sources are the primary source of funding for most skilled nursing facilities and specialty hospitals and are subject to statutory and regulatory changes, administrative rulings, and government funding restrictions, all of which may materially increase or decrease the rates of payment to skilled nursing facilities and specialty hospitals and in some cases, the amount of additional rents payable to us under our leases. There is no assurance that payments under such programs will remain at levels comparable to the present levels or be sufficient to cover all the operating and fixed costs allocable to Medicaid and Medicare patients. Decreases in reimbursement levels could have an adverse impact on the revenues of the tenants of our skilled nursing facilities and specialty hospitals, which could in turn adversely impact their ability to make their monthly lease or debt payments to us. Changes in reimbursement levels have very little impact on our assisted and independent living facilities because virtually all of their revenues are paid from private funds.

There exist various federal and state laws and regulations prohibiting fraud and abuse by healthcare providers, including those governing reimbursements under Medicaid and Medicare as well as referrals and financial relationships. Federal and state governments are devoting increasing attention to anti-fraud initiatives. Our tenants may not comply with these current or future regulations, which could affect their ability to operate or to continue to make lease or mortgage payments.

Healthcare facilities in which we invest are also generally subject to federal, state and local licensure statutes and regulations and statutes which may require regulatory approval, in the form of a certificate of need (CON), prior to the addition or construction of new beds, the addition of services or certain capital expenditures. CON requirements generally apply to skilled nursing facilities and specialty hospitals. CON requirements are not uniform throughout the United States and are subject to change. In addition, some states have staffing and other regulatory requirements. We cannot predict the impact of regulatory changes with respect to licensure and CONs on the operations of our tenants.

Executive Officers of the Company

The table below sets forth the name, position and age of each executive officer of the Company. Each executive officer is appointed by the board of directors, serves at its pleasure and holds office until a successor is appointed, or until the earliest of death, resignation or removal. There is no “family relationship” among any of the named executive officers or with any director. All information is given as of February 18, 2009:

Name	Position	Age
Douglas M. Pasquale	President and Chief Executive Officer	54
Donald D. Bradley	Executive Vice President and Chief Investment Officer	53
Abdo H. Khoury	Executive Vice President and Chief Financial and Portfolio Officer	59

Douglas M. Pasquale—President and Chief Executive Officer since April 2004 and a director since November 2003. Mr. Pasquale was Executive Vice President and Chief Operating Officer from November 2003 to April 2004. Mr. Pasquale served as the Chairman and Chief Executive Officer of ARV Assisted Living, an operator of assisted living facilities, from December 1999 to September 2003. From April 2003 to September 2003, Mr. Pasquale concurrently served as President and Chief Executive Officer of Atria Senior Living Group. From March 1999 to December 1999, Mr. Pasquale served as the President and Chief Executive Officer at ARV and he served as the President and Chief Operating Officer at ARV from June 1998 to March 1999. Previously, Mr. Pasquale served as President and Chief Executive Officer of Richfield Hospitality Services, Inc. and Regal Hotels International-North America, a hotel ownership and hotel management company, from 1996 to 1998, and as its Chief Financial Officer from 1994 to 1996. Mr. Pasquale is a member of the Executive Board of the American Seniors Housing Association (ASHA) and is a director of Alexander & Baldwin Inc. and Matson Navigation Company, Inc.

Donald D. Bradley—Executive Vice President since March 2008 and Chief Investment Officer since July 2004. Mr. Bradley was a Senior Vice President from March 2001 to February 2008 and the General Counsel

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from March 2001 to June 2004. From January 2000 to February 2001, Mr. Bradley was engaged in various personal interests. Mr. Bradley was formerly the General Counsel of Furon Company, a NYSE-listed international, high performance polymer manufacturer from 1990 to December 1999. Previously, Mr. Bradley served as a Special Counsel of O’Melveny & Myers LLP, an international law firm with which he had been associated since 1982. Mr. Bradley is a member of the Executive Board of ASHA.

Abdo H. Khoury—Executive Vice President since March 2008 and Chief Financial and Portfolio Officer since July 2005. Mr. Khoury was a Senior Vice President from July 2005 to February 2008 and Chief Portfolio Officer from August 2004 to June 2005. Mr. Khoury served as the Executive Vice President of Operations of Atria Senior Living Group (formerly ARV Assisted Living, Inc.) from June 2003 to March 2004. From January 2001 to May 2003, Mr. Khoury served as President of ARV and he served as Chief Financial Officer at ARV from March 1999 to January 2001. From October 1997 to February 1999, Mr. Khoury served as President of the Apartment Division at ARV. From January 1991 to September 1997, Mr. Khoury ran Financial Performance Group, a business and financial consulting firm located in Newport Beach, California.

Employees

As of February 18, 2009, we had 33 employees.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports required by Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are electronically filed with the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Our annual, quarterly and current reports, and amendments to reports are also available, free of charge, on our website at www.nhp-reit.com, as soon as reasonably practicable after those reports are available on the SEC’s website. These materials, together with our Governance Principles, Director Committee Charters and Business Code of Conduct & Ethics referenced below, are available in print to any stockholder who requests them in writing by contacting:

Nationwide Health Properties, Inc.

610 Newport Center Drive, Suite 1150

Newport Beach, California 92660

Attention: Abdo H. Khoury

Availability of Governance Principles and Board of Director Committee Charters

Our board of directors has adopted charters for its Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Investment Committee. Our board of directors has also adopted Governance Principles. The Governance Principles and each of the charters are available on our website at www.nhp-reit.com.

Business Code of Conduct & Ethics

Our board of directors has adopted a Business Code of Conduct & Ethics, which applies to all employees, including our chief executive officer, chief financial and portfolio officer, chief investment officer, vice presidents and directors. The Business Code of Conduct & Ethics is posted on our website at www.nhp-reit.com. Our Audit Committee must approve any waivers of the Business Code of Conduct & Ethics. We presently intend to disclose any amendments and waivers, if any, of the Business Code of Conduct & Ethics on our website; however, if we change our intention, we will file any amendments or waivers with a current report on Form 8-K. There have been no waivers of the Business Code of Conduct & Ethics.

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Item 1A. Risk Factors.

Generally speaking, the risks facing our company fall into three categories: risks associated with the operations of our tenants, risks related to our operations and risks related to our taxation as a REIT. You should carefully consider the risks and uncertainties described below before making an investment decision in our company. These risks and uncertainties are not the only ones facing us and there may be additional matters that we are unaware of or that we currently consider immaterial. All of these could adversely affect our business, financial condition, results of operations and cash flows and, thus, the value of an investment in our company.

RISKS RELATING TO OUR TENANTS

Our financial position could be weakened and our ability to make distributions could be limited if any of our major tenants were unable to meet their obligations to us or failed to renew or extend their relationship with us as their lease terms expire or their mortgages mature, or if we were unable to lease or re-lease our facilities or make mortgage loans on economically favorable terms. We have no operational control over our tenants. There may end up being more serious tenant financial problems that lead to more extensive restructurings or tenant disruptions than we currently expect. This could be unique to a particular tenant or it could be more industry wide, such as further federal or state governmental reimbursement reductions in the case of our skilled nursing facilities as governments work through their budget deficits, continuing reduced occupancies or slow lease-ups for our assisted and independent living facilities or medical office buildings due to general economic and other factors and increases in insurance premiums, labor and other expenses. These adverse developments could arise due to a number of factors, including those listed below.

The global financial crisis could adversely impact the financial condition of our tenants, which could impair our tenants’ ability to meet their obligations to us.

The U.S. is experiencing a recession which is nearing the longest duration since the Great Depression. Continued concerns about the uncertainty over whether our economy will be adversely impacted by inflation, deflation or stagflation, and the systemic impact of energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market in the U.S. have contributed to increased market volatility and diminished expectations for the U.S. economy. This difficult operating environment may adversely impact the financial condition of our tenants. If these economic conditions continue, our tenants may be unable to meet their obligations to us and our business could be adversely affected.

The bankruptcy, insolvency or financial deterioration of our tenants could significantly delay our ability to collect unpaid rents or require us to find new operators for rejected facilities.

We are exposed to the risk that our tenants may not be able to meet their obligations, which may result in their bankruptcy or insolvency. This risk is more pronounced during weak economic conditions, such as those we are currently experiencing. Although our leases and loans provide us the right to evict a tenant, demand immediate repayment and other remedies, the bankruptcy laws afford certain rights to a party that has filed for bankruptcy or reorganization. A tenant in bankruptcy may be able to restrict our ability to collect unpaid rent and interest during the bankruptcy proceeding.

• Leases.    If one of our lessees seeks bankruptcy protection, the lessee can either assume or reject the lease. Generally, the lessee is required to make rent payments to us during its bankruptcy until it rejects the lease. If the lessee assumes the lease, the court cannot change the rental amount or any other lease provision that could financially impact us. However, if the lessee rejects the lease, the facility would be returned to us. In that event, if we were able to re-lease the facility to a new tenant only on unfavorable terms or after a significant delay, we could lose some or all of the associated revenue from that facility for an extended period of time.

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• Mortgage Loans.    If a tenant defaults under one of our mortgage loans, we may have to foreclose on the mortgage or protect our interest by acquiring title to a property and thereafter make substantial improvements or repairs in order to maximize the facility’s investment potential. Tenants may contest enforcement of foreclosure or other remedies, seek bankruptcy protection against an enforcement and/or bring claims for lender liability in response to actions to enforce mortgage obligations. If a tenant seeks bankruptcy protection, the automatic stay of the federal bankruptcy law would preclude us from enforcing foreclosure or other remedies against the tenant unless relief is obtained from the court. In addition, a tenant would not be required to make principal and interest payments while an automatic stay was in effect. High “loan to value” ratios or declines in the value of the facility may prevent us from realizing an amount equal to our mortgage loan upon foreclosure.

The receipt of liquidation proceeds or the replacement of a tenant that has defaulted on its lease or loan could be delayed by the approval process of any federal, state or local agency necessary for the replacement of the tenant licensed to manage the facility. In some instances, we may take possession of a property that exposes us to successor liabilities and operating risks. These events, if they were to occur, could reduce our revenue and operating cash flow.

In addition, many of our leases contain non-contingent rent escalators for which we recognize income on a straight-line basis over the lease term. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset included in the caption “Other assets” on our balance sheets. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. We assess the collectibility of the straight-line rent that is expected to be collected in a future period, and, depending on circumstances, we may provide a reserve against the previously recognized straight-line rent receivable asset for a portion, up to its full value, that we estimate may not be recoverable. The balance of straight-line rent receivables at December 31, 2008, net of allowances was $21.2 million. To the extent any of the tenants under these leases become unable to pay the contracted cash rent, we may be required to write down the straight-line rents receivable from those tenants, which would reduce our net income.

Operators that fail to comply with governmental reimbursement programs such as Medicare or Medicaid, licensing and certification requirements, fraud and abuse regulations or new legislative developments may be unable to meet their obligations to us.

Our tenants are subject to numerous federal, state and local laws and regulations that are subject to frequent and substantial changes (sometimes applied retroactively) resulting from legislation, adoption of rules and regulations, and administrative and judicial interpretations of existing law. The ultimate timing or effect of these changes cannot be predicted. These changes may have a dramatic effect on our tenants’ costs of doing business and the amount of reimbursement by both government and other third-party payors. The failure of any of our tenants to comply with these laws, requirements and regulations could adversely affect their ability to meet their obligations to us. In particular:

• Medicare, Medicaid and Private Payor Reimbursement.    Those of our tenants who operate skilled nursing facilities and specialty hospitals derive a significant portion of their revenue from governmentally-funded reimbursement programs, such as Medicare and Medicaid. Failure to maintain certification and accreditation in these programs would result in a significant loss of funding from them. Moreover, federal and state governments have adopted and continue to consider various reform proposals to control and reduce healthcare costs. For example, the Balanced Budget Act of 1997(BBA) established a Prospective Payment System for Medicare skilled nursing facilities under which facilities are paid a federal per diem rate for most covered nursing facility services. Under this system, skilled nursing facilities are no longer assured of receiving reimbursement adequate to cover the costs of operating the facilities. Governmental concern regarding healthcare costs and their budgetary impact may result in significant reductions in payment to healthcare facilities, and future reimbursement rates

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for either governmental or private payors may not be sufficient to cover cost increases in providing services to patients. Although in 1999 the federal government enacted the Balance Budget Refinement Act (BBRA) to increase the per diem reimbursement rates for high acuity patients, this increase continues to challenge profitability by other cost-saving governmental payment methodologies such as, for example, that affecting bad debt reporting. The reimbursement of uncollectible Medicare coinsurance amounts for all beneficiaries (other than beneficiaries of both Medicare and Medicaid) is reduced from 100% to 70% for skilled nursing facility cost reporting periods beginning on or after October 1, 2005. The federal government agency that manages Medicare estimates that the change in treatment of bad debt will result in a decrease in payments to nursing facilities in an amount of $490 million from 2006 to 2010. The change in the rule for calculating bad debt may affect the liquidity or profitability of skilled nursing facilities, although to what affect continues to be difficult to predict. In addition, the proposed 2009 budget contains provisions that, if implemented, could reduce or slow the growth in Medicare reimbursement rates for skilled nursing facilities. In many instances, revenues from Medicaid programs are already insufficient to cover the actual costs incurred in providing care to those patients. Many of the states where our tenants reside report budget deficits that put future Medicaid funding at risk and may limit as well as decrease the number of Medicaid beds available to patients in the near future as well as in the long term. In addition, reimbursement from private payors has in many cases effectively been reduced to levels approaching those of government payors. Loss of certification or accreditation, or any changes in reimbursement policies that reduce reimbursement to levels that are insufficient to cover the cost of providing patient care, could cause the revenues of our tenants to decline, potentially jeopardizing their ability to meet their obligations to us. In that event, our revenues from those facilities could be reduced, which could in turn cause the value of our affected properties to decline. Governmental concern regarding specialty hospitals may result in reforms to the payments to those facilities and future reimbursement rates may change affecting the payment system for services provided by specialty hospitals.

• Licensing and Certification.    Our tenants and facilities are generally subject to regulatory and licensing requirements of federal, state and local authorities and are periodically audited by them to confirm compliance. Failure to obtain licensure or loss of licensure would prevent a facility, or in some cases, potentially all of a tenant’s facilities in a state, from operating. Our skilled nursing facilities and specialty hospitals generally require governmental approval, often in the form of a certificate of need that generally varies by state and is subject to change, prior to the addition or construction of new beds, the addition of services or certain capital expenditures. Some of our facilities may not be able to satisfy current and future regulatory requirements and for this reason may be unable to continue operating in the future. In such event, our revenues from those facilities could be reduced or eliminated for an extended period of time. State licensing, as well as Medicare and Medicaid laws require operators of nursing homes and assisted living facilities to comply with extensive standards governing operations, including federal conditions of participation and state operating regulations. Federal and state agencies administering those laws regularly inspect our facilities and investigate complaints. Our tenants and their managers receive notices of potential sanctions and remedies from time to time, and such sanctions have been imposed from time to time on facilities operated by them. If they are unable to cure deficiencies which have been identified or which are identified in the future, such sanctions may be imposed and if imposed may adversely affect our tenants’ ability to operate and therefore pay rent to us.

• Fraud and Abuse Laws and Regulations.    There are various extremely complex federal and state laws and regulations governing a wide array of business referrals, relationships and arrangements that prohibit fraud by healthcare providers. These laws include (i) civil and criminal laws that prohibit filing false claims or making false statements to receive payment or certification under Medicare and Medicaid, or failing to refund overpayments or improper payments, (ii) certain federal and state anti-remuneration and fee-splitting laws (including, in the case of certain states, laws that extend to arrangements that do not involve items or services reimbursable under Medicare or Medicaid), such as the federal healthcare Anti-Kickback Statute and federal self-referral law (also known as the “Stark law”), which govern various types of financial arrangements among healthcare providers and others

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who may be in a position to refer or recommend patients to these providers (iii) the Civil Monetary Penalties law, which may be imposed by the U.S. Department of Health and Human Services (“HHS”) for certain fraudulent acts, (iv) federal and state patient privacy laws, such as the privacy and security provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and (v) certain state laws that prohibit the corporate practice of medicine. Many states have also adopted or are considering legislation to increase patient protections, such as criminal background checks on care providers and minimum staffing levels. Governments are devoting increasing attention and resources to anti-fraud initiatives against healthcare providers. In addition, certain laws, such as the Federal False Claims Act, allow for individuals to bring qui tam (or whistleblower) actions on behalf of the government for violations of fraud and abuse laws. These qui tam actions may be filed by present and former patients, nurses or other employees, or other third parties. The HIPAA and the Balanced Budget Act of 1997 expand the penalties for healthcare fraud, including broader provisions for the exclusion of providers from the Medicare and Medicaid programs. Further, under anti-fraud demonstration projects such as Operation Restore Trust, the Office of Inspector General of HHS, in cooperation with other federal and state agencies, has focused and may continue to focus on the activities of skilled nursing facilities in certain states in which we have properties. The violation of any of these regulations by a tenant may result in the imposition of criminal or civil fines or other penalties (including exclusion from the Medicare and Medicaid programs) that could jeopardize that tenant’s ability to make lease or mortgage payments to us or to continue operating its facility. Under the Medicare Prescription Drug Improvement and Modernization Act of 2003, an 18-month moratorium was imposed on the ability of specialty hospitals to use the “whole hospital exception” to the Stark law. The moratorium, however, did not affect specialty hospitals in operation or under development as of November 18, 2003, because such hospitals were “grandfathered” under the moratorium. A number of organizations, including the Medical Payment Advisory Commission (“MedPAC”) and HHS, have studied the utilization, costs of service, quality of care and financial impact of specialty hospitals and their physician owners relative to community hospitals. Although the 18-month moratorium expired on June 8, 2005, HHS announced on June 9, 2005, that it would temporarily suspend the enrollment of new specialty hospitals so that it could analyze whether specialty hospitals meet the definition of hospital set forth in the Social Security Act and review the procedures used to qualify specialty hospitals for participation in the Medicare program. In February 2006, the Deficit Reduction Act of 2005 was enacted, which extended HHS’ suspension of new specialty hospital enrollment until the earlier of six months (which could be extended by two months) or the completion of a final HHS report on specialty hospitals. On August 8, 2006, HHS submitted to Congress its final report outlining the agency’s plans to address physician ownership in specialty hospitals and simultaneously end the administrative moratorium on specialty hospital enrollment in the Medicare program. The final report details a variety of steps that HHS has already taken to address specialty hospital development, and announces additional steps that HHS intends to take in the future. Among those additional steps outlined by HHS are new requirements that hospitals disclose details about physician ownership and investment in their institutions. The added information will allow HHS to closely examine the relationships between physician investment and compensation. The final HHS report may result in legislation extending the moratorium on specialty hospitals or further restricting physician ownership of specialty hospitals. To the extent that any of our specialty hospital tenants have physician owners, those tenants may have to undergo significant ownership disclosures and structural changes if such legislation were passed.

• Legislative Developments.    Each year, legislative proposals are introduced or proposed in Congress, and in some state legislatures, that would effect major changes in the healthcare system, nationally or at the state level. Among the proposals under consideration are cost controls on state Medicaid reimbursements, hospital cost-containment initiatives by public and private payors, uniform electronic data transmission standards for healthcare claims and payment transactions, and higher standards to protect the security and privacy of health-related information. We cannot predict whether any proposals will be adopted or, if adopted, what effect, if any, these proposals would have on our tenants and, thus, our business.

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Two of the operators of our facilities each account for more than 10% of our revenues. If these operators experience financial difficulties, or otherwise fail to make payments to us, our revenues may significantly decline.

At December 31, 2008, as adjusted for facilities acquired and disposed of during that period, Brookdale and Hearthstone accounted for 15.2% and 10.6%, respectively, of our revenues. We cannot assure you that Brookdale or Hearthstone will have sufficient assets, income or access to financing to enable it to satisfy its obligations to us. Any failure by Brookdale or Hearthstone to effectively conduct its operations could have a material adverse effect on its business reputation or on its ability to attract and retain patients and residents in its properties. The failure or inability of Brookdale and/or Hearthstone to pay their obligations to us could materially reduce our revenues and net income, which could in turn reduce the amount of dividends we pay and cause our stock price to decline.

Hearthstone agreed to pay over the initial 15-year term of its lease “Supplemental Rent” equal to a specified percentage of Hearthstone’s annual gross revenue. In accordance with the lease, payment of Supplemental Rent of $1.6 million for the first 24 months of the lease was deferred until June 2008, when it became payable in 12 monthly installments, and Supplemental Rent from June 2008 was to be paid quarterly starting in September 2008. Hearthstone has failed to pay the deferred Supplemental Rent of $133,000 per month. Hearthstone has notified us that it is currently unable to make such payments and has sought to renegotiate the terms of our lease. Although we have a $6.0 million letter of credit that secures Hearthstone’s payment obligations to us (which we have not yet drawn on), it is possible that the letter of credit may not be sufficient to compensate us for all costs that may arise in connection with a modification of the lease or our pursuit of other remedies.

We may be unable to find another tenant for our properties if we have to replace Brookdale, Hearthstone or any of our other tenants.

We may have to find another tenant for the properties covered by one or more of our master lease agreements with Brookdale or Hearthstone or any of our other tenants upon the expiration of the terms of the applicable lease or upon a default by any such tenants. During any period that we are attempting to locate one or more tenants, there could be a decrease or cessation of rental payments on those properties. We cannot assure you that Brookdale or Hearthstone or any of our other tenants will elect to renew their respective leases with us upon expiration of the terms thereof, nor can we assure you that we will be able to locate another suitable tenant or, if we are successful in locating such a tenant, that the rental payments from that new tenant would not be significantly less than the existing rental payments. Our ability to locate another suitable tenant may be significantly delayed or limited by various state licensing, receivership, certificate of need or other laws, as well as by Medicare and Medicaid change-of-ownership rules. We also may incur substantial additional expenses in connection with any such licensing, receivership or change-of-ownership proceedings. Any such delays, limitations and expenses could materially delay or impact our ability to collect rent, to obtain possession of leased properties or otherwise to exercise remedies for tenant default and could have an adverse effect on our business.

Because of the unique and specific improvements required for healthcare facilities, we may be required to incur substantial development and renovation costs to make certain of our properties suitable for other tenants, which could materially adversely affect our business, results of operations and financial condition.

Healthcare facilities are typically highly customized and may not be easily adapted to non-healthcare-related uses. The improvements generally required to conform a property to healthcare use, such as upgrading electrical, gas and plumbing infrastructure, are costly and often times tenant-specific. A new or replacement tenant may require different features in a property, depending on that tenant’s particular operations. If a current tenant is unable to pay rent and vacates a property, we may incur substantial expenditures to modify a property before we are able to re-lease the space to another tenant. Also, if the property needs to be renovated to accommodate multiple tenants, we may incur substantial expenditures before we are able to re-lease the space. Consequently,

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our properties may not be suitable for lease to traditional office or other healthcare tenants without significant expenditures or renovations, which costs may materially adversely affect our business, results of operations and financial condition.

If our tenants are unable or unwilling to incur capital expenditures to maintain and improve our properties, our properties may cease to be competitive and our results of operations would be adversely impacted.

Capital expenditures to maintain and improve our properties are generally incurred by our tenants. If our tenants fail to pay for such expenditures, we may incur substantial costs to maintain or improve our properties, which could adversely affect our liquidity. If we fail to make such capital expenditures, our properties may become less attractive to tenants and our results of operations could be adversely impacted. Although some of our leases provide for impound accounts to reduce the risk of a tenant failing to make the requisite capital expenditures, many of our leases do not provide for such impound accounts and, for those that do, such accounts may not always be sufficient to protect us from loss.

Our tenants are faced with significant potential litigation and rising insurance costs that not only affect their ability to obtain and maintain adequate liability and other insurance, but also may affect their ability to pay their lease or mortgage payments and fulfill their insurance, indemnification and other obligations to us.

In some states, advocacy groups have been created to monitor the quality of care at skilled nursing facilities and assisted and independent living facilities, and these groups have brought litigation against operators. Also, in several instances, private litigation by skilled nursing facility patients or assisted and independent living facility covered residents or their families has resulted in very large damage awards for alleged abuses. The effect of this litigation and potential litigation has been to materially increase the costs of monitoring and reporting quality of care compliance incurred by our tenants. In addition, the cost of liability and medical malpractice insurance has increased and may continue to increase so long as the present litigation environment continues. This has affected the ability of some of our tenants to obtain and maintain adequate liability and other insurance and, thus, manage their related risk exposure. In addition to being unable to fulfill their insurance, indemnification and other obligations to us under their leases and mortgages and thereby potentially exposing us to those risks, this could cause our tenants to be unable to pay their lease or mortgage payments, potentially decreasing our revenues and increasing our collection and litigation costs. Moreover, to the extent we are required to foreclose on the affected facilities, our revenues from those facilities could be reduced or eliminated for an extended period of time.

In addition, we may in some circumstances be named as a defendant in litigation involving the actions of our tenants. In previous years, we have been named as a defendant in lawsuits for wrongful death. Although we have no involvement in the activities of our tenants and our standard leases generally require our tenants to indemnify and carry insurance to cover us in certain cases, a significant judgment against us in such litigation could exceed our and our tenants’ insurance coverage, which would require us to make payments to cover the judgment. We have purchased our own insurance as additional protection against such issues.

Increased competition has resulted in lower revenues for some operators and may affect their ability to meet their payment obligations to us.

The healthcare industry is highly competitive, and we expect that it may become more competitive in the future. Our tenants are competing with numerous other companies providing similar healthcare services or alternatives such as home health agencies, life care at home, community-based service programs, retirement communities and convalescent centers. In addition, past overbuilding in the assisted and independent living market caused a slow-down in the fill rate of newly constructed buildings and a reduction in the monthly rate many newly built and previously existing facilities were able to obtain for their services and adversely impacted the occupancy of mature properties. This in turn resulted in lower revenues for the operators of certain of our facilities and contributed to the financial difficulties of some operators. While we believe that overbuilt markets should reach stabilization in the next several years and are less of a problem today due to minimal development,

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we cannot be certain that the operators of all of our facilities will be able to achieve and maintain occupancy and rate levels that will enable them to meet all of their obligations to us. Our tenants are expected to encounter increased competition in the future, including through industry consolidation, that could limit their ability to attract residents or expand their businesses and therefore affect their ability to pay their lease or mortgage payments.

RISKS RELATING TO US AND OUR OPERATIONS

In addition to the tenant related risks discussed above, there are a number of risks directly associated with us and our operations.

We are subject to particular risks associated with real estate ownership, which could result in unanticipated losses or expenses.

Our business is subject to many risks that are associated with the ownership of real estate. For example, if our tenants do not renew their leases, we may be unable to re-lease the facilities at favorable rental rates. Other risks that are associated with real estate acquisition and ownership include, among other things, the following:

• general liability, property and casualty losses, some of which may be uninsured;

• the inability to purchase or sell our assets rapidly to respond to changing economic conditions, due to the illiquid nature of real estate and the real estate market;

• leases which are not renewed or are renewed at lower rental amounts at expiration;

• the exercise of purchase options by operators resulting in a reduction of our rental revenue;

• costs relating to maintenance and repair of our facilities and the need to make expenditures due to changes in governmental regulations, including the Americans with Disabilities Act;

• environmental hazards created by prior owners or occupants, existing tenants, mortgagors or other persons for which we may be liable;

• acts of God affecting our properties; and

• acts of terrorism affecting our properties.

We rely on external sources of capital to fund future capital needs, and continued turbulence in financial markets could impair our ability to meet maturing commitments or make future investments necessary to grow our business.

In order to qualify as a REIT under the Internal Revenue Code, we are required, among other things, to distribute each year to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and by excluding net capital gain. Because of this distribution requirement, we will not be able to fund, from cash retained from operations, all future capital needs, including capital needs to satisfy or refinance maturing commitments and to make investments. As a result, we rely on external sources of capital. If we are unable to obtain needed capital at all or only on unfavorable terms from these sources, we might not be able to make the investments needed to grow our business, or to meet our obligations and commitments as they mature, which could negatively affect the ratings of our debt and even, in extreme circumstances, affect our ability to continue operations. Our access to capital depends upon a number of factors over which we have little or no control, including rising interest rates, inflation and other general market conditions and the market’s perception of our potential for future increases in earnings and cash distributions, as well as the market price of the shares of our capital stock.

Recent market and economic conditions have been unprecedented and challenging with tighter credit conditions and slower growth through the third and fourth quarters of 2008. Continued concerns about the

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systemic impact of inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market in the U.S. have contributed to diminished expectations for the U.S. economy and unprecedented levels of volatility in financial markets.

As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. We had $700 million available under our Credit Facility at December 31, 2008, and we have no current reason to believe that we will be unable to access the facility in the future. However, concern about the stability of the markets generally and the strength of borrowers specifically has led many lenders and institutional investors to reduce and, in some cases, cease to provide, funding to borrowers. In addition, the banks that are parties to the Credit Facility might have incurred losses or might have reduced capital reserves as a result of their prior lending to other borrowers, their holdings of certain mortgage securities or their other financial relationships, in part because of the general weakening of the U.S. economy and the increased financial instability of many borrowers. As a result, these banks might be or become capital constrained and might tighten their lending standards, or become insolvent. If they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from other borrowers within a short period of time, these banks might not be able to meet their funding commitments under our Credit Facility. If we were unable to access our Credit Facility it could result in an adverse effect on our liquidity and financial condition.

We have approximately $71.1 million of indebtedness that matures in 2009 and $71.3 million of indebtedness that matures in 2010. Additionally, some of our senior notes can be put to us prior to the stated maturity date. We have approximately $55.0 million of such senior notes that we may be required to repay in 2009 and none that we may be required to repay in 2010. If current market conditions continue, they may limit our ability to timely refinance maturing liabilities and access the capital markets to meet liquidity needs, resulting in a material adverse effect on our financial condition and results of operations.

Our plans for growth require regular access to the capital and credit markets. If capital is not available at an acceptable cost, it will significantly impair our ability to make future investments as acquisitions and development projects become difficult or impractical to pursue.

Our potential capital sources include:

• Equity Financing.    As with other publicly-traded companies, the availability of equity capital will depend, in part, on the market price of our common stock which, in turn, will depend upon various market conditions that may change from time to time. Among the market conditions and other factors that may affect the market price of our common stock are:

• the extent of investor interest;

• the reputation of REITs in general and the healthcare sector in particular and the attractiveness of REIT equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;

• our financial performance and that of our operators;

• the contents of analyst reports about us and the REIT industry;

• general stock and bond market conditions, including changes in interest rates on fixed income securities, which may lead prospective purchasers of our common stock to demand a higher annual yield from future distributions;

• our failure to maintain or increase our dividend, which is dependent, to a large part, on growth of funds from operations which in turn depends upon increased revenues from existing investments, future investments and rental increases; and

• other factors such as governmental regulatory action and changes in REIT tax laws.

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The market value of the equity securities of a REIT is generally based upon the market’s perception of the REIT’s growth potential and its current and potential future earnings and cash distributions. Our failure to meet the market’s expectation with regard to future earnings and cash distributions likely would adversely affect the market price of our common stock.

• Debt Financing/Leverage.    Financing for our maturing commitments and future investments may be provided by borrowings under our bank line of credit, private or public offerings of debt, the assumption of secured indebtedness, mortgage financing on a portion of our owned portfolio or through joint ventures. We are subject to risks normally associated with debt financing, including the risks that our cash flow will be insufficient to service our debt or make distributions to our stockholders, that we will be unable to refinance existing indebtedness or that the terms of refinancing may not be as favorable as the terms of existing indebtedness or may include restrictive covenants that limit our flexibility in operating our business. If we are unable to refinance or extend principal payments due at maturity or pay them with proceeds from other capital transactions, our cash flow may not be sufficient in all years to pay distributions to our stockholders and to repay all maturing debt. Furthermore, if prevailing interest rates, changes in our debt ratings, or other factors at the time of refinancing, result in higher interest rates upon refinancing, the interest expense relating to that refinanced indebtedness would increase, which could reduce our profitability and the amount of dividends we are able to pay. Moreover, additional debt financing increases the amount of our leverage. The degree of leverage could have important consequences to stockholders, including affecting our investment grade ratings, our ability to obtain additional financing in the future for working capital, capital expenditures, investments, development or other general corporate purposes and making us more vulnerable to a downturn in business or the economy generally.

• Joint Ventures.    In appropriate circumstances, we may develop or acquire properties in joint ventures with other persons or entities when circumstances warrant the use of these structures. Our participation in joint ventures is subject to the risks that:

• our co-venturers or partners might at any time have economic or other business interests or goals that are inconsistent with our business interests or goals;

• our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives (including actions that may be inconsistent with our REIT status);

• our co-venturers or partners may have different objectives from us regarding the appropriate timing and pricing of any sale or refinancing of properties; and

• our co-venturers or partners might become bankrupt or insolvent.

Joint ventures require us to share decision-making authority with our co-venturers or partners, which limits our ability to control the properties in the joint ventures. Even when we have a controlling interest, certain major decisions may require partner approval.

Increasing consolidation at the operator or REIT level could increase competition and reduce our profitability.

Our business is highly competitive and it may become more competitive in the future. We compete with a number of healthcare REITs and other financing sources, some of which are larger and have a lower cost of capital than we do. If consolidation occurs at the REIT or operator level, it could result in fewer investment opportunities for us and/or reduced profitability on our investments.

There is no assurance that we will make distributions in the future.

We intend to continue to pay quarterly distributions to our stockholders consistent with our historical practice. However, our ability to pay distributions will be adversely affected if any of the risks described herein

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occur. Our payment of distributions is subject to compliance with restrictions contained in our unsecured bank credit facilities and our senior notes indentures. All distributions are made at the discretion of our board of directors and our future distributions will depend upon our earnings, our cash flows, our anticipated cash flows, our financial condition, maintenance of our REIT tax status and such other factors as our board of directors may deem relevant from time to time. There are no assurances of our ability to pay distributions in the future. In addition, our distributions in the past have included, and may in the future include, a return of capital.

A downgrade of our credit rating could impair our ability to obtain additional debt financing on favorable terms, if at all, and significantly reduce the trading price of our common stock.

We currently have the lowest investment grade credit ratings of Baa3 from Moody’s Investors Service and BBB- from Standard & Poor’s Ratings Service and Fitch Ratings on our senior unsecured debt securities. If any of these rating agencies downgrade our credit rating, or place our rating under watch or review for possible downgrade, this could make it more difficult or expensive for us to obtain additional debt financing, and the trading price of our common stock will likely decline. Factors that may affect our credit rating include, among other things, our financial performance, our success in raising sufficient equity capital, adverse changes in our debt and fixed charge coverage ratios, our capital structure and level of indebtedness and pending or future changes in the regulatory framework applicable to our operators and our industry. We cannot assure you that these credit agencies will not downgrade our credit rating in the future.

We have now, and may have in the future, exposure to contingent rent escalators and floating interest rates, both of which can have the effect of reducing our profitability.

We receive revenue primarily by leasing our assets under leases that are long-term triple-net leases in which the rental rate is generally fixed with annual rent escalations, subject to certain limitations. Certain leases contain escalators contingent on revenues or other factors, including increases based on changes in the Consumer Price Index. If our tenants’ revenues do not increase as a result of the weak economic conditions we are currently experiencing or other factors and/or the Consumer Price Index does not increase, our revenues may not increase. The Consumer Price Index decreased from December 2007 to December 2008. If the negative trend continues, revenue from leases containing escalators based on changes in the Consumer Price Index would not increase in 2009 which could reduce our profitability.

Certain of our debt obligations are floating-rate obligations with interest rate and related payments that vary with the movement of LIBOR or other indexes. The generally fixed rate nature of our revenue and the variable rate nature of certain of our interest obligations create interest rate risk. If interest rates increase, it could have the effect of reducing or further reducing our profitability or making our lease and other revenue insufficient to meet our obligations.

We have now, and may have in the future, exposure related to our leases and loans secured by letters of credit, some of which are issued by banks that may be affected by the severely distressed housing and credit markets or other factors.

As of December 31, 2008, leases covering 301 facilities and loans on 16 facilities were secured by irrevocable letters of credit totaling $56.4 million. In the event that any of the tenants or borrowers related to these facilities become unable to meet their obligations, we are entitled to draw down on the letters of credit an amount equal to the earned and unpaid obligations. Our access to funds under the letters of credit is dependent on the ability of the issuing banks to meet their funding commitments. These banks might have incurred losses or might have reduced capital reserves as a result of their prior lending to other borrowers, their holdings of certain mortgage securities or their other financial relationships, in part because of the general weakening of the U.S. economy and the increased financial instability of many borrowers. As a result, these banks might be or become capital constrained and might tighten their lending standards, or become insolvent. If they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from other borrowers

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within a short period of time, these banks might not be able to meet their funding commitments under our letters of credit. If an issuing bank has financial difficulties, we may be unable to draw down on a letter of credit, which could delay or reduce our ability to collect unpaid obligations and reduce our revenue and operating cash flow.

The failure of one or more of our insurance carriers could adversely impact our business.

We and our tenants insure against a wide range of risks through insurance. If the current global financial crisis were to affect the solvency of any carrier providing insurance to us or any of our tenants, it could result in their inability to make payments on insurance claims, which could have an adverse effect on our financial condition or that of our tenants. In addition, the failure of one or more insurance companies may increase the costs to renew existing insurance policies.

Unforeseen costs associated with investments in new properties could reduce our profitability.

Our business strategy contemplates future investments that may not prove to be successful. For example, we might encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent liabilities, and newly-acquired properties might require significant management attention that would otherwise be devoted to our ongoing business. If we issue equity securities or incur additional debt, or both, to finance future investments, it may reduce our per share financial results and/or increase our leverage. If we pursue new development projects, such projects would be subject to numerous risks, including risks of construction delays or cost overruns that may increase project costs, and new project commencement risks such as receipt of zoning, occupancy and other required governmental approvals and permits. Moreover, if we agree to provide funding to enable healthcare operators to build, expand or renovate facilities on our properties and the project is not completed, we could be forced to become involved in the development to ensure completion or we could lose the property. These costs may negatively affect our results of operations.

We may recognize impairment charges or losses on the sale of certain facilities.

From time to time, we classify certain facilities, including unoccupied buildings and land parcels, as assets held for sale. To the extent we are unable to sell these properties for book value, we may be required to take an impairment charge or loss on the sale, either of which would reduce our net income.

We may face competitive risks related to reinvestment of sale proceeds.

From time to time, we will have cash available from (1) the proceeds of sales of our securities, (2) principal payments on our loans receivable and (3) the sale of properties, including non-elective dispositions, under the terms of master leases or similar financial support arrangements. In order to maintain our current financial results, we must re-invest these proceeds, on a timely basis. We compete for real estate investments with a broad variety of potential investors. This competition for attractive investments may negatively affect our ability to make timely investments on terms acceptable to us. Delays in acquiring properties may negatively impact revenues and perhaps our ability to make distributions to stockholders.

Our success depends in part on our ability to retain key personnel, and if we are not successful in succession planning for our senior management team our business could be adversely impacted.

We depend on the efforts of our executive officers, particularly our President and Chief Executive Officer, Mr. Douglas M. Pasquale and our Executive Vice Presidents, Mr. Donald D. Bradley and Mr. Abdo H. Khoury. The loss of the services of these persons or the limitation of their availability could have an adverse impact on our operations. Although we have entered into employment and/or security agreements with certain of these executive officers, these agreements may not assure their continued service. In addition, if we are unsuccessful in our succession planning efforts, the continuity of our business and results of operations could be adversely impacted in the event that we are unable to retain one or more of these officers.

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As owners of real estate, we are subject to environmental laws that expose us to the possibility of having to pay damages to the government and costs of remediation if there is contamination on our property.

Under various laws, owners of real estate may be required to investigate and clean up hazardous substances present at a property, and may be held liable for property damage or personal injuries that result from environmental contamination. These laws also expose us to the possibility that we become liable to reimburse the government for damages and costs it incurs in connection with the contamination, regardless of whether we were aware of, or responsible for, the environmental contamination. We review environmental surveys of the facilities we own prior to their purchase. Based upon those surveys we do not believe that any of our properties are subject to material environmental contamination. However, environmental liabilities may be present in our properties and we may incur costs to remediate contamination that could have a material adverse effect on our business or financial condition.

If the holders of our senior notes exercise their rights to require us to repurchase their securities, we may have to make substantial payments, incur additional debt or issue equity securities to finance the repurchase.

Some of our senior notes grant the holders the right to require us, on specified dates, to repurchase their securities at a price equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest. If the holders of these securities elect to require us to repurchase their securities, we may be required to make significant payments, which would adversely affect our liquidity. Alternatively, we could finance the repurchase through the issuance of additional debt securities, which may have terms that are not as favorable as the securities we are repurchasing, or equity securities, which will dilute the interests of our existing stockholders.

Our debt instruments contain covenants that restrict our ability to engage in certain transactions and may impair our ability to respond to changing business and economic conditions.

Covenants under our Credit Facility and our senior notes may limit our management’s discretion by restricting our ability to, among other things, incur additional debt, redeem our capital stock, enter into certain transactions with affiliates, pay dividends and make other distributions, make investments and other restricted payments and create liens. Any additional financing we may obtain could contain similar or more restrictive covenants. Our desire to comply with these covenants may in the future prevent us from taking certain actions that we would otherwise deem appropriate.

Our level of indebtedness may adversely affect our financial results.

As of December 31, 2008, we had total consolidated indebtedness of $1.5 billion and total assets of $3.5 billion. We expect to incur additional indebtedness in the future. The risks associated with financial leverage include:

• increasing our sensitivity to general economic and industry conditions;

• limiting our ability to obtain additional financing on favorable terms;

• requiring a substantial portion of our cash flow to make interest and principal payments due on our indebtedness;

• a possible downgrade of our credit rating; and

• limiting our flexibility in planning for, or reacting to, changes in our business and industry.

The market price of our common stock has fluctuated, and could fluctuate significantly.

Stock markets, in general, and stock prices of participants in the healthcare industry, in particular, have recently experienced significant levels of volatility. Continued market volatility may adversely affect the market price of our common stock. As with other publicly traded securities, the trading price of our common stock

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depends on several factors, many of which are beyond our control, including: general market and economic conditions; the effects of direct governmental action in financial markets; prevailing interest rates; the market for similar securities issued by other REITs; our credit rating; and our financial condition and results of operations.

A decision by any of our significant stockholders to sell a substantial amount of our common stock could depress our stock price. Based on filings with the SEC and shareholder reporting services, as of December 31, 2008, five of our stockholders owned at least five percent of our common stock and held an aggregate of approximately 28.7% of our common stock. A decision by any of these stockholders to sell a substantial amount of our common stock could depress the trading price of our common stock.

Holders of our outstanding preferred stock have rights that are senior to the rights of holders of our common stock, have significant influence over our affairs, and their interests may differ from those of our other stockholders.

Our board of directors has the authority to designate and issue preferred stock that may have dividend, liquidation and other rights that are senior to those of our common stock. As of December 31, 2008, 749,184 shares of our Series B cumulative convertible preferred stock were outstanding. Holders of our preferred stock are entitled to cumulative dividends before any dividends may be declared or set aside on our common stock, subject to limited exceptions. Upon our voluntary or involuntary liquidation, dissolution or winding up, before any payment is made to holders of our common stock, holders of our preferred stock are entitled to receive a liquidation preference of $100 per share, plus any accrued and unpaid distributions. This will reduce the remaining amount of our assets, if any, available to distribute to holders of our common stock. In addition, holders of our preferred stock have the right to elect two additional directors to our board of directors if six quarterly preferred dividends are in arrears.

Compliance with changing government regulations may result in additional expenses.

Changing laws, regulations and standards, including those relating to corporate governance and public disclosure, new SEC regulations and New York Stock Exchange rules, may create create uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to our business practices. We are committed to maintaining high standards of compliance with all applicable laws, regulations and standards. As a result, our efforts to comply with evolving laws, regulations and standards may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed.

Our charter and bylaws and the laws of the state of our incorporation contain provisions that may delay, defer or prevent a change in control or other transactions that could provide stockholders with the opportunity to realize a premium over the then-prevailing market price for our common stock.

In order to protect us against the risk of losing our REIT status for U.S. federal income tax purposes, our charter and bylaws prohibit (i) the beneficial ownership by any single person of more than 9.9% of the issued and outstanding shares of our stock, by value or number of shares, whichever is more restrictive, and (ii) any transfer that would result in beneficial ownership of our stock by fewer than 100 persons. We have the right to redeem shares acquired or held in excess of the ownership limit. In addition, if any acquisition of our common or preferred stock violates the 9.9% ownership limit, the subject shares are automatically transferred to a trust temporarily for the benefit of a charitable beneficiary and, ultimately, are transferred to a person whose ownership of the shares will not violate the ownership limit. Furthermore, where such transfer in trust would not

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prevent a violation of the ownership limits, the prohibited transfer is treated as void ab initio. The ownership limit may have the effect of delaying, deferring or preventing a change in control of our company and could adversely affect our stockholders’ ability to realize a premium over the market price for the shares of our common stock. Our board of directors has increased the ownership limit to 20% with respect to one of our stockholders, Cohen & Steers, Inc. (“Cohen & Steers”). Cohen & Steers beneficially owned 5.6 million of our shares, or approximately 5.5% of our common stock, as of December 31, 2008.

Our charter authorizes us to issue additional shares of common stock and one or more series of preferred stock and to establish the preferences, rights and other terms of any series of preferred stock that we issue. Although our board of directors has no intention to do so at the present time, it could establish a series of preferred stock that could delay, defer or prevent a transaction or a change in control that might involve the payment of a premium over the market price for our common stock or otherwise be in the best interests of our stockholders.

In addition, the laws of our state of incorporation and the following provisions of our charter may delay, defer or prevent a transaction that may be in the best interests of our stockholders:

• in certain circumstances, a proposed consolidation, merger, share exchange or transfer must be approved by a two-thirds vote of our preferred stockholders entitled to be cast on the matter;

• business combinations must be approved by 90% of the outstanding shares unless the transaction receives a unanimous vote or consent of our board of directors or is a combination solely with a wholly owned subsidiary; and

• the classification of our board of directors into three groups, with each group of directors being elected for successive three-year terms, may delay any attempt to replace our board.

As a Maryland corporation, we are subject to provisions of the Maryland Business Combination Act (“MBCA”) and the Maryland Control Share Acquisition Act (“MCSA”). The MBCA may prohibit certain future acquirors of 10% or more of our stock (entitled to vote generally in the election of directors) and their affiliates from engaging in business combinations with us for a period of five years after such acquisition, and then only upon recommendation by the board of directors with (1) a stockholder vote of 80% of the votes entitled to be cast (including two-thirds of the stock not held by the acquiror and its affiliates) or (2) if certain stringent fair price tests are met. The MCSA may cause acquirors of stock at levels in excess of 10%, 33% or 50% of the voting power of our stock to lose the voting rights of such stock unless voting rights are restored by vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes of stock held by the acquiring stockholder and our officers and employee directors.

RISKS RELATED TO OUR TAXATION AS A REIT

If we fail to remain qualified as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our stockholders.

We intend to operate in a manner that will allow us to qualify as a REIT for federal income tax purposes. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. Accordingly, there can be no assurance that the IRS will not contend that our interests in subsidiaries or other issuers will not cause a violation of the REIT requirements.

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If we were to fail to qualify as a REIT in any taxable year, we would be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and dividends paid to our stockholders would not be deductible by us in computing our taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of, and trading prices for, our common stock. Unless we were entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

The maximum tax rate applicable to income from “qualified dividends” payable to domestic stockholders that are individuals, trusts and estates has been reduced by legislation to 15% through the end of 2010. Dividends payable by REITs, however, generally are not eligible for the reduced rates. Although this legislation does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow.

Even if we remain qualified for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, and state or local income, property and transfer taxes. For example, we have in the past acquired, and may in the future acquire, appreciated assets from a corporation that is not a REIT (i.e., a corporation taxable under subchapter C of the Internal Revenue Code) in a transaction in which we receive carry-over tax basis. If we subsequently dispose of those assets and recognize gain during the ten-year period following their acquisition, we may be subject to tax on such appreciation at the highest corporate income tax rate then applicable. In addition, in order to meet the REIT qualification requirements, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from that dealer property or inventory, we may hold some of our non-healthcare assets through taxable REIT subsidiaries, or TRSs, or other subsidiary corporations that will be subject to corporate-level income tax at regular rates. We will be subject to a 100% penalty tax on certain amounts if the economic arrangements among our tenants, our TRS and us are not comparable to similar arrangements among unrelated parties. Any of these taxes would decrease cash available for distribution to our stockholders.

Complying with REIT requirements with respect to our TRS limits our flexibility in operating or managing certain properties through our TRS.

A TRS may not directly or indirectly operate or manage a healthcare facility. For REIT qualification purposes, the definition of a “healthcare facility” means a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and which, immediately before the termination, expiration, default, or breach of the lease of or mortgage secured by such facility, was operated by a provider of such services which was eligible for participation in the Medicare program under Title XVIII of the Social Security Act with respect to such facility. If the IRS were to treat a subsidiary corporation of ours as directly or indirectly operating or managing a healthcare facility, such subsidiary would not qualify as a TRS, which could jeopardize our REIT qualification under the REIT gross asset tests.

Complying with REIT requirements may cause us to forgo otherwise attractive opportunities.

To qualify as a REIT for federal income tax purposes, we continually must satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to

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our stockholders and the ownership of our stock. We may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source-of-income, asset-diversification or distribution requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make certain attractive investments.

Complying with REIT requirements may limit our ability to hedge effectively.

The REIT provisions of the Internal Revenue Code substantially limit our ability to hedge our liabilities. Any income from a hedging transaction we enter into to manage risk of interest rate changes or currency fluctuations with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of both the 75% and 95% gross income tests, if certain requirements are met. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of the gross income tests. As a result, we might have to limit our use of advantageous hedging techniques or implement those hedges through one of our domestic TRSs. This could increase the cost of our hedging activities because our domestic TRSs would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.

Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our continued qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.

Certain stock dividends paid by REITs may be treated as taxable dividends if each stockholder has an option to elect to receive his or her dividend in cash.

The Internal Revenue Service has recently issued Revenue Procedure 2009-15. Under this Revenue Procedure, a stock dividend paid by a REIT and which is declared on or after January 1, 2008 with respect to a taxable year ending on or before December 31, 2009 may be treated as a taxable dividend if each stockholder has an option to elect to receive his or her dividend in cash, even if the aggregate cash amount paid to all stockholders is limited, as long as the cash portion represents at least 10% of the total dividend payment to be made to all stockholders and certain other requirements are satisfied. Accordingly, if we pay a stock dividend with a cash election feature in accordance with this Revenue Procedure, your tax liability with respect to such dividend may be significantly greater than the amount of cash you receive.

New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT.

You should recognize that the present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the federal income tax treatment of an investment in us. The federal income tax rules that affect REITs constantly are under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. Revisions in federal tax laws and interpretations thereof could cause us to change our investments and commitments and affect the tax considerations of an investment in us.

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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

See Item 1 for details.

Item 3. Legal Proceedings.

From time to time, we are a party to various other legal proceedings, lawsuits and other claims (some of which may not be insured) that arise in the normal course of our business. Regardless of their merits, these matters may force us to expend significant financial resources. Except as described in this Item 3, we are not aware of any other legal proceedings or claims that we believe may have, individually or taken together, a material adverse effect on our business, results of operations or financial position. However, we are unable to predict the ultimate outcome of pending litigation and claims, and if management’s assessment of our liability with respect to these actions and claims is incorrect, such actions and claims could have a material adverse effect on our business, results of operations or financial position.

In late 2004 and early 2005, we were served with several lawsuits in connection with a fire at the Greenwood Healthcare Center that occurred on February 26, 2003. At the time of the fire, the Greenwood Healthcare Center was owned by us and leased to and operated by Lexington Healthcare Group. There were a total of 13 lawsuits arising from the fire. Those suits have been filed by representatives of patients who were either killed or injured in the fire. The lawsuits seek unspecified monetary damages. The complaints allege that the fire was set by a resident who had previously been diagnosed with depression. The complaints allege theories of negligent operation and premises liability against Lexington Healthcare, as operator, and us as owner. Lexington Healthcare has filed for bankruptcy. The matters have been consolidated into one action in the Connecticut Superior Court Complex Litigation Docket at the Judicial District at Hartford, and are in various stages of discovery and motion practice. We have filed a motion for summary judgment with regard to certain pending claims and will be filing additional summary judgment motions for any remaining claims. Mediation was commenced with respect to most of the claims, and a settlement has been reached in 10 of the 13 pending claims within the limits of our commercial general liability insurance. We obtained a judgment of nonsuit in one case whereby it is now dismissed, and the two remaining claims will be subject to summary judgment motions and ongoing efforts at resolution. Summary judgment rulings are not expected until the Spring of 2009.

Lexington Insurance, which potentially owes insurance coverage for these claims to us, has filed a lawsuit against us which seeks no monetary damages, but which does seek a court order limiting its insurance coverage obligations to us. We have filed a counterclaim against Lexington Insurance demanding additional insurance coverage from Lexington in amounts up to $10 million. The parties to that case, which is pending on the Complex Litigation Docket for the Judicial District of Hartford, have filed cross-motions for summary judgment. Those motions will likely be decided in 2009.

We are being defended in the matter by our commercial general liability carrier. We believe that we have substantial defenses to the claims and that we have adequate insurance to cover the risks, should liability nonetheless be imposed. However, because the remaining claims are still in the process of discovery and motion practice, it is not possible to predict the ultimate outcome of these claims.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

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PART II

Item 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is listed on the New York Stock Exchange. It has been our policy to declare quarterly dividends to holders of our common stock in order to comply with applicable sections of the Internal Revenue Code governing real estate investment trusts. Set forth below are the high and low sales prices of our common stock from January 1, 2007 to December 31, 2008, as reported by the New York Stock Exchange and the cash dividends per share paid with respect to such periods. Future dividends will be declared and paid at the discretion of our board of directors and will depend upon cash generated by operating activities, our financial condition, relevant financing instruments, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our board of directors deems relevant. However, we currently expect to pay cash dividends in the future, comparable in amount to dividends recently paid.

	High		Low		Dividend
2008
First quarter	$	35.50	$	28.07	$	0.44
Second quarter		37.67		30.62		0.44
Third quarter		39.99		30.44		0.44
Fourth quarter		37.72		18.13		0.44
2007
First quarter	$	34.52	$	29.63	$	0.41
Second quarter		35.01		26.00		0.41
Third quarter		31.21		22.63		0.41
Fourth quarter		33.90		27.22		0.41

As of February 13, 2009 there were approximately 1,112 holders of record of our common stock.

We currently maintain two equity compensation plans: the 1989 Stock Option Plan (the “1989 Plan”) and the 2005 Performance Incentive Plan (the “2005 Plan”). Each of these plans has been approved by our stockholders. The following table sets forth, for our equity compensation plans, the number of shares of common stock subject to outstanding options, warrants and rights (including restricted stock units and performance shares); the weighted-average exercise price of outstanding options, warrants and rights; and the number of shares remaining available for future award grants under the plans as of December 31, 2008:

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders	1,467,015	(1)(2)	$	17.82	(3)	1,623,124	(4)
Equity compensation plans not approved by security holders	—			—		—
Total	1,467,015		$	17.82		1,623,124

(1) Of these shares, 387,972 were subject to stock options then outstanding under the 1989 Plan. In addition, this number includes an aggregate of 1,079,043 shares that were subject to restricted stock units, performance shares and stock appreciation rights awards then outstanding under the 2005 Plan.

(2) This number does not include an aggregate of 94,037 shares of unvested restricted stock then outstanding under the 2005 Plan.

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(3) This number reflects the weighted-average exercise price of outstanding stock options and has been calculated exclusive of restricted stock units, performance shares and stock appreciation rights outstanding under the 2005 Plan.

(4) All of these shares were available for grant under the 2005 Plan. The shares available under the 2005 Plan are, subject to certain other limits under that plan, generally available for any type of award authorized under the 2005 Plan, including stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses and performance shares.

The following graph demonstrates the performance of the cumulative total return to the stockholders of our common stock during the previous five years in comparison to the cumulative total return on the National Association of Real Estate Investment Trusts (NAREIT) Equity Index and the Standard & Poor’s 500 Stock Index. The NAREIT Equity Index is comprised of all tax-qualified, equity oriented, real estate investment trusts listed on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market.

It should be noted that this graph represents historical stock performance and is not necessarily indicative of any future stock price performance.

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Item 6. Selected Financial Data.

The following table presents our selected financial data. Certain of this financial data has been derived from our audited financial statements included elsewhere in this Annual Report on Form 10-K and should be read in conjunction with those financial statements and accompanying notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Years ended December 31,
	2008			2007			2006			2005			2004
	(In thousands, except per share data)
Operating Data:
Revenues	$	370,665		$	306,269		$	222,910		$	158,393		$	130,044
Income from continuing operations		108,140			132,633			52,634			33,438			32,823
Discontinued operations		159,998			91,825			132,943			36,503			41,999
Net income		268,138			224,458			185,577			69,941			74,822
Preferred stock dividends		(7,637	)		(13,434	)		(15,163	)		(15,622	)		(11,802	)
Preferred stock redemption charge		—			—			—			(795	)		—
Income available to common stockholders		260,501			211,024			170,414			53,524			63,020
Dividends paid on common stock		171,496			150,819			120,406			100,179			99,666
Per Share Data:
Diluted income from continuing operations available to common stockholders	$	1.02		$	1.31		$	0.48		$	0.25		$	0.32
Diluted income available to common stockholders		2.64			2.32			2.19			0.79			0.95
Dividends paid on common stock		1.76			1.64			1.54			1.48			1.48
Balance Sheet Data:
Investments in real estate, net	$	3,124,229		$	2,961,442		$	2,583,515		$	1,786,075		$	1,637,390
Total assets		3,458,125			3,144,353			2,704,814			1,867,220			1,710,111
Borrowings under credit facility		—			41,000			139,000			224,000			186,000
Senior notes		1,056,233			1,166,500			887,500			570,225			470,000
Notes and bonds payable		435,199			340,150			355,411			236,278			187,409
Stockholders’ equity		1,760,667			1,482,693			1,243,809			781,032			815,826
Other Data:
Net cash provided by operating activities	$	250,497		$	240,528		$	175,418		$	152,887		$	119,237
Net cash used in investing activities		(117,747	)		(395,006	)		(658,305	)		(144,126	)		(296,225	)
Net cash provided by (used in) financing activities		(69,907	)		159,190			487,577			(7,229	)		174,735
Diluted weighted average shares outstanding		98,855			91,129			77,879			67,446			66,211
Reconciliation of Funds from Operations (1):
Net income	$	268,138		$	224,458		$	185,577		$	69,941		$	74,822
Preferred stock dividends		(7,637	)		(13,434	)		(15,163	)		(15,622	)		(11,802	)
Preferred stock redemption charge		—			—			—			(795	)		—
Real estate related depreciation		118,603			100,340			77,714			56,670			47,541
Depreciation in income from unconsolidated joint ventures		4,768			1,703			—			246			745
Loss (gain) on sale of facilities		(154,995	)		(118,114	)		(96,791	)		(4,908	)		(3,750	)
Loss (gain) on sale of facilities from unconsolidated joint venture		—			—			—			(330	)		116
Funds from operations available to common stockholders	$	228,877		$	194,953		$	151,337		$	105,202		$	107,672

(1) We believe that funds from operations is an important non-GAAP supplemental measure of operating performance because it excludes the effect of depreciation and gains (losses) from sales of facilities (both of which are based on historical costs which may be of limited relevance in evaluating current performance). Additionally, funds from operations is used by us and widely used by industry analysts as a measure of operating performance for equity REITs. We therefore disclose funds from operations, although it is a measurement that is not defined by accounting principles generally accepted in the United States. We calculate funds from operations in accordance with the National Association of Real Estate Investment Trusts’ definition. Funds from operations does not represent cash generated from operating activities as defined by accounting principles generally accepted in the United States (funds from operations does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

To facilitate your review and understanding of this section of our report and the financial statements that follow, we are providing an overview of what management believes are the most important considerations for understanding our company and its business—the key factors that drive our business and the principal associated risks.

Who We Are

We are an investment grade rated (since 1994), public equity, healthcare REIT. We seek to maximize total stockholder return by passively investing in a safe, secure and growing asset base comprised of healthcare properties—primarily senior housing facilities, long-term care facilities and medical office buildings. The healthcare sector is relatively recession resistant and presents unique growth potential as evidenced by the well known favorable demographics and increasing market penetration of a rapidly growing senior population, the increased use of healthcare services led by the aging “baby boomer” generation and, in each case, the corresponding recognized need for additional and improved healthcare facilities and services. Our management team has extensive operating backgrounds in senior housing and long-term care that we believe provides us a competitive advantage in these sectors. In 2008, we established a full service medical office building platform comprised of a Class A portfolio of facilities backed by well regarded property management services and development capabilities.

What We Invest In

We invest passively in the following types of geographically diversified healthcare properties:

• Senior Housing/Assisted and Independent Living Facilities (ALFs, ILFs and ALZs). This primarily private pay-backed sector breaks down into three principal categories, each of which may be operated on a stand alone basis or combined with one or more of the others into a single facility or campus:

Ø Assisted Living Facilities (ALFs) designed for frail seniors who can no longer live independently and instead need assistance with activities of daily living (i.e., feeding, dressing, bathing, etc.) but do not require round-the-clock skilled nursing care.

Ø Independent Living Facilities (ILFs) designed for seniors who pay for some concierge-type services (e.g., meals, housekeeping, laundry, transportation, and social and recreational activities) but require little, if any, assistance with activities of daily living.

Ø Alzheimer Facilities (ALZs) designed for those residents with significant cognitive impairment as a result of having Alzheimer’s or related dementia.

• Long-Term Care/Skilled Nursing Facilities (SNFs). This primarily government (Medicare and Medicaid) reimbursement backed sector consists of skilled nursing facilities designed for inpatient rehabilitative, restorative, skilled nursing and other medical treatment for residents who are medically stable and do not require the intensive care of an acute care or rehabilitative hospital.

• Continuing Care Retirement Communities (CCRCs). These communities are designed to provide a continuum of care for residents as they age and their health deteriorates and typically combine on a defined campus integrated senior housing and long-term care facilities.

• Medical Office Buildings (MOBs). MOBs usually house several different unrelated medical practices, although they can be associated with a large single-specialty or multi-specialty group. MOB tenants include physicians, dentists, psychologists, therapists and other healthcare providers, with space devoted to patient examination and treatment, diagnostic imaging, outpatient surgery and other outpatient services. Since an MOB generally has several tenants under separate leases, they require day-to-day property management services that typically include rent collection from disparate tenants, re-marketing space as it becomes vacant and, for non-triple-net leases, responsibility for many of the MOB’s

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associated operating expenses (although many of these are, or can effectively be, passed through to the tenants as well). MOBs are generally classified as being either “on campus” or “off campus.”

Ø On Campus MOBs typically are located on or immediately adjacent to an acute care hospital campus and are generally subject to a hospital ground lease. Its tenants are primarily doctors whose patients have been or will be treated at the hospital. The relationship with a vibrant hospital tends to create stronger tenant demand, generate higher rental rates, provide higher tenant retention and discourage competitive new supply as compared to most “off campus” MOBs that are unaffiliated with a healthcare system.

Ø Off Campus MOBs have become more and more prevalent as healthcare has increasingly shifted from the inpatient model to the typically less expensive outpatient model. Instead of typically being subject to a hospital ground lease with operating and use restrictions limiting the owner’s control over the facility, including as a practical matter the ability to aggressively raise rents, owners of off campus MOBs typically have full ownership of the facility and control over all leasing and operating decisions. Further, those affiliated with a healthcare system may also enjoy many of the same advantages as an on campus facility.

How We Do It

Using a three-prong foundation that focuses on proactive capital management, active portfolio management and quality funds from operations (“FFO”) growth, we typically invest in senior housing facilities, long-term care facilities and medical office buildings as provided below.

• Senior Housing and Long-Term Care Facilities (Including CCRCs). We primarily make our investments in these properties passively by acquiring an ownership interest in facilities and leasing them to unaffiliated tenants under “triple-net” “master” leases that transfer the obligation for all facility operating costs (insurance, property taxes, utilities, maintenance, capital improvements, etc.) to the tenants. In addition, but to a much lesser extent because we view the risks of this activity to be greater due to less favorable bankruptcy treatment and other factors, from time to time, we extend mortgage loans and other financing to tenants, generally at higher rates than we charge for rent on our owned facilities to compensate us for the additional risk. Currently, about 93% of our revenues from this area are derived from our leases, with the remaining 7% from our mortgage loans and other financing.

• Medical Office Buildings (MOBs). We generally lease medical office buildings to multiple tenants under separate non-triple-net leases, where we are responsible for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants), and to single tenants under “triple-net” “master” leases like those referred to above. Until 2008, we primarily made our multi-tenant MOB investments in MOBs through joint ventures with specialists in this sector that would manage the venture and provide property management services. In 2008, we expanded our capabilities by executing on our strategic initiative to establish a full service MOB platform through a multi-faceted transaction with Pacific Medical Buildings LLC (“PMB”). First, we acquired from PMB and certain of its affiliates their interests in 12 Class A MOBs for $250.2 million. These MOBs comprise over 500 thousand square feet and are located in California (9), Nevada (2) and Oregon (1). Second, we entered into an agreement with PMB pursuant to which we currently have the right, but not the obligation, to acquire up to approximately $1 billion of MOBs to be developed by PMB through April 2016. Finally, we acquired from PMB a 50% interest in PMB Real Estate Services LLC (“PMBRES”), a full service property management company. PMBRES provides property and asset management services for the above and other MOBs we previously acquired from affiliates of PMB.

How We Measure Our Progress—Funds from Operations

We believe that FFO is an important non-GAAP supplemental measure of operating performance because it excludes the effect of depreciation and gains (losses) from sales of facilities (both of which are based on historical costs which may be of limited relevance in evaluating current performance). Additionally, FFO is

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widely used by industry analysts as a measure of operating performance for equity REITs. We therefore discuss FFO, although it is a measurement that is not defined by accounting principles generally accepted in the United States. We calculate FFO in accordance with the National Association of Real Estate Investment Trusts’ definition. FFO does not represent cash generated from operating activities as defined by accounting principles generally accepted in the United States (it does not include changes in operating assets and liabilities) and, therefore, should not be considered as an alternative to net income as the primary indicator of operating performance or to cash flow as a measure of liquidity.

What We Have Accomplished Over the Last Three Years

We have enjoyed numerous successes since the end of 2005, perhaps the most notable of which are as follows:

• Investments. We invested, directly and through our consolidated and unconsolidated joint ventures, $2.7 billion in the last three years, growing our net investments in real estate 75% from $1.8 billion at the end of 2005 to $3.1 billion at the end of 2008. During this period, we strategically diversified our asset base through investments in an MOB platform and facilities representing 20% of our investments at the end of 2008. Coupled with our capital and portfolio management initiatives, over the past three years this growing asset base enabled us to accomplish the following:

Ø Quality, Recurring FFO Growth—We increased our adjusted FFO per share over 20% from $1.84 per share in 2005 to $2.24 per share in 2008.

Ø Growing Dividend—We increased our cash dividend 19% from $1.48 per share in 2005 to $1.76 per share in 2008.

• Capital—More Flexible and Diverse Structure and Conservative Balance Sheet. Our overall capital goal has been to balance the debt and equity components of our capital structure, increase our sources of capital, enhance our credit statistics, preserve and strengthen our investment grade credit ratings (Moody’s Investors Service: Baa3, Standard & Poor’s Ratings Service: BBB- and Fitch Ratings: BBB-) and continue to protect our dividend. In addition, in response to the crises in the capital and credit markets, in 2008 we strived to maximize our liquidity. We believe we have accomplished all of these goals, with the following items being particularly noteworthy over the past three years:

Ø Conservative Leverage—We reduced our debt to equity ratio (on an undepreciated book basis) from 46.1% at the end of 2005 to 40.6% at the end of 2008.

Ø Multiple Capital Sources—We added the following to our existing $700 million credit facility and traditional marketed debt and equity capital sources:

ü Controlled Equity Offering—We implemented a program in 2006 under which we periodically issue equity with a targeted price greater than the volume weighted average price, subject to fees of under 2%. To date, we have issued approximately 20 million shares of common stock under this program, resulting in net proceeds of approximately $580 million.

ü Institutional Joint Venture Capital—We formed a joint venture in January 2007 with a state pension fund investor advised by Morgan Stanley Real Estate to provide an additional capital source. The joint venture has invested $552 million in assisted and independent living facilities, skilled nursing facilities and continuing care retirement communities, including $227 million in facilities acquired by the joint venture from us, and has an approved capacity to invest up to $975 million in these property types.

ü Asset Management Capital—In 2006, we sold to Brookdale senior housing assets previously leased to them for about $150 million (a 6.7% capitalization rate on our rent, resulting in a gain on sale of $77.1 million), with the proceeds reinvested at an 8.3% starting rent rate in new investments with new growth-oriented customers. In addition to the above sales to the institutional joint venture, in 2007, we sold 36 skilled nursing facilities primarily located in Texas with an average age of 35 years for $128 million (an 8.5% capitalization rate on our rent,

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resulting in a gain on sale of $60.1 million) and invested a total of $362 million at an average starting rate of 8.3% in newer skilled nursing facilities located in multiple states. In 2008, we sold to Emeritus senior housing assets previously leased to them for $305 million (a 6.1% capitalization rate on our rent, resulting in a gain on sale of $135.0 million) and retained the net proceeds to bolster our liquidity.

Ø Enhanced Credit Statistics—We increased our adjusted fixed charge coverage from 2.41x at the end of 2005 to 3.04x at the end of 2008.

Ø Enhanced Credit Ratings—Following the announcement of our multi-faceted MOB transaction with PMB, both Moody’s and Fitch upgraded us to a “positive watch,” while S&P reaffirmed its rating.

Ø Dividend Secure and Growing—We maintained our dividend coverage ratio (dividends per share divided by recurring diluted FFO per share) at about 80%, while our dividend increased 19%.

Ø Maximized Liquidity—Retained $82.3 million in cash and full availability on our $700 million credit line at the end of 2008.

• Portfolio Management—Implemented Sophisticated Program. Since the end of 2005, we have continued to dramatically upgrade our portfolio management program by enhancing the proprietary software system we developed, adding six dedicated portfolio management personnel and proactively anticipating and responding to potential problem areas. We believe we now have one of the most sophisticated portfolio management programs in our industry.

Focus and Outlook for 2009

Typically, our primary focus for the new year would be continuing to improve our net income and FFO on an absolute and per share basis and further diversifying and upgrading our portfolio, while also continuing to explore alternative capital sources, investment structures, joint ventures and property types that would enable us to compete more effectively in the markets in which we invest. Normally, we would rely on the rent escalators (generally between 1% and 3%) contained in many of our leases as a source of substantial “built in” internal net income and FFO growth. However, since most of these escalators are tied to annual increases in the Consumer Price Index, which recently have trended negatively, we are likely to see much less, if any, internal growth from these rent escalators as long as deflationary conditions continue. Moreover, at this time external growth appears more problematic as we continue to be confronted with unprecedented adverse capital markets and economic conditions, with the resulting tighter credit conditions and slower growth that evolved in 2008 continuing for the foreseeable future. Specifically, continued concerns about the recession which is nearing the longest duration since the Great Depression, the uncertainty over whether our economy will be adversely impacted by inflation, deflation or stagflation, and the systemic impact of energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market in the U.S. have contributed to increased market volatility and diminished expectations for the U.S. economy. This difficult operating environment may make it more difficult for some or many of our tenants to pay their rent.

The cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. Notably, with $82.3 million in cash and $700 million available under our Credit Facility at the end of 2008, we believe we have more than adequate liquidity to address our business commitments over the next two years. While we have no current reason to believe that we will be unable to access the Credit Facility in the future, concern about the stability of the markets generally and the strength of borrowers specifically has led many lenders and institutional investors to reduce and, in some cases, cease to provide, funding to borrowers. The economic downturn and credit crisis has adversely impacted financial institutions resulting in the bankruptcy or merger of many of them and other companies that could in turn adversely impact our ability to draw on our Credit Facility. If we were unable to access our Credit Facility it could result in an adverse effect on our liquidity and financial condition. In addition, further deterioration of economic conditions and continued turbulence in market conditions may adversely affect the liquidity and financial condition of our tenants.

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Our plans for growth require regular access to the capital and credit markets. If capital is not available at an acceptable cost, it will significantly impair our ability to make future investments as acquisitions and development projects become difficult or impractical to pursue. Similarly, our growth plans could be retarded, our financial position weakened and our ability to make distributions limited if deteriorating general economic conditions or other factors led to any of our major senior housing or other tenants being unable to meet their obligations to us. We have no operational control over our tenants. There may end up being more serious tenant financial problems that lead to more extensive restructurings or tenant disruptions than we currently expect. This could be unique to a particular tenant or it could be more industry wide, such as continuing reduced occupancies for our assisted and independent living facilities due to the severely distressed housing and credit markets, unemployment or other factors and reduced federal or state governmental reimbursement reductions in the case of our skilled nursing facilities as governments work through their severe budget deficits.

With that, our focus for 2009 initially will be primarily threefold: (1) closely monitor and maximize our liquidity until we are reasonably comfortable that reasonable and ready access to the capital and credit markets has returned; (2) closely monitor the capital and credit markets looking for opportunities to access capital at a reasonable cost; and (3) closely monitor the performance of our tenants and use our unique operating backgrounds to proactively identify and address potential problems that may develop.

Critical Accounting Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions, including those that impact our most critical accounting policies. We base our estimates and assumptions on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates. We believe the following are our most critical accounting policies.

Principles of Consolidation

Our consolidated financial statements include the accounts of NHP, its wholly-owned subsidiaries and its joint ventures that are controlled through voting rights or other means. We apply Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, Consolidation of Variable Interest Entities, as revised (“FIN 46R”), for arrangements with variable interest entities (“VIEs”) and would consolidate those VIEs where we are the primary beneficiary. We also apply Emerging Issues Task Force (“EITF”) Issue 04-5, Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights (“EITF 04-05”), to investments in joint ventures.

Our judgment with respect to our level of influence or control of an entity and whether we are the primary beneficiary of a VIE involves the consideration of various factors including, but not limited to, the form of our ownership interest, our representation on the entity’s governing body, the size of our investment, estimates of future cash flows, our ability to participate in policy-making decisions and the rights of the other investors to participate in the decision making process and to replace us as manager and/or liquidate the venture, if applicable. Our ability to correctly assess our influence or control over an entity or determine the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements.

Revenue Recognition

Rental income from operating leases is recognized in accordance with accounting principles generally accepted in the United States, including Statement of Financial Accounting Standards (SFAS) No. 13 Accounting for Leases and SEC Staff Accounting Bulletin (“SAB”) No. 101 Revenue Recognition as amended by SEC SAB No. 104. Our leases generally contain annual escalators. Most of our leases contain non-contingent rent

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escalators for which we recognize income on a straight-line basis over the lease term. Recognizing income on a straight-line basis requires us to calculate the total non-contingent rent to be paid over the life of a lease and to recognize the revenue evenly over that life. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset included in the caption “Other assets” on our balance sheets. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. We assess the collectibility of straight-line rents in accordance with the applicable accounting standards and our reserve policy and defer recognition of straight-line rent if its collectibility is not reasonably assured. Certain leases contain escalators contingent on revenues or other factors, including increases based on changes in the Consumer Price Index. Such revenue increases are recognized over the lease term as the related contingencies occur.

Our assessment of the collectibility of straight-line rents is based on several factors, including the financial strength of the tenant and any guarantors, the historical operations and operating trends of the facility, the historical payment pattern of the tenant, the type of facility and whether we intend to continue to lease the facility to the current tenant, among others. If our evaluation of these factors indicates we may not receive the rent payments due in the future, we defer recognition of the straight-line rental income and, depending on the circumstances, we will provide a reserve against the previously recognized straight-line rent receivable asset for a portion, up to its full value, that we estimate may not be recoverable. If our assumptions or estimates regarding the collectibility of future rent payments required by a lease change, we may have to record a reserve to reduce or further reduce the rental revenue recognized or to reserve or further reserve the existing straight-line rent receivable balance.

We recorded $10.3 million of revenues in excess of cash received during 2008, $2.9 million of revenues in excess of cash during 2007 and $0.8 million of revenues in excess of cash during 2006. We have straight-line rent receivables, net of reserves, recorded under the caption “Other assets” on our balance sheets of $21.2 million at December 31, 2008, and $10.7 million at December 31, 2007 net of reserves of $90.7 million and $79.4 million, respectively. We evaluate the collectibility of the straight-line rent receivable balances on an ongoing basis and provide reserves against receivables we believe may not be fully recoverable. The ultimate amount of straight-line rent we realize could be less than amounts recorded.

Depreciation and Useful Lives of Assets

We calculate depreciation on our buildings and improvements using the straight-line method based on estimated useful lives ranging up to 40 years, generally from 20 to 40 years depending on factors including building type, age, quality and location. A significant portion of the cost of each property is allocated to buildings. For our triple-net leased buildings, this amount generally approximates 90%. For medical office buildings that are not leased under a single triple-net lease, this percentage may be substantially lower as we allocate purchase prices in accordance with SFAS No. 141 Business Combinations (SFAS No. 141) which generally results in substantial allocations to assets such as lease-up intangible assets, above market tenant and ground lease intangible assets and in-place lease intangible assets (collectively, “intangible assets”) included on our balance sheets and/or below market tenant and ground lease intangible liabilities included in the caption “Accounts payable and accrued liabilities” on our balance sheets.

The allocation of the cost between land and building, and the determination of the useful life of a property are based on management’s estimates, which are based in part on independent appraisals or other consultants’ reports. We calculate depreciation and amortization on equipment and lease costs using the straight-line method based on estimated useful lives of up to five years or the lease term, whichever is appropriate. We amortize intangible assets and liabilities over the remaining lease terms of the respective leases. We review and adjust useful lives periodically. If we do not allocate appropriately between land and building or we incorrectly estimate the useful lives of our assets, our computation of depreciation and amortization will not appropriately reflect the usage of the assets over future periods. If we overestimate the useful life of an asset, the depreciation expense related to the asset will be understated, which could result in a loss if the asset is sold in the future.

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Asset Impairment

We review our long-lived assets individually on a quarterly basis to determine if there are indicators of impairment in accordance with SFAS No. 142 Goodwill and Other Intangible Assets (SFAS No. 142) and SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). Indicators may include, among others, a tenant’s inability to make rent payments, operating losses or negative operating trends at the facility level, notification by a tenant that it will not renew its lease, or a decision to dispose of an asset or adverse changes in the fair value of any of our properties. For operating assets, if indicators of impairment exist, we compare the undiscounted cash flows from the expected use of the property to its net book value to determine if impairment exists. If the sum of the future estimated undiscounted cash flows is higher than the current net book value, in accordance with SFAS No. 144, we conclude no impairment exists. If the sum of the future estimated undiscounted cash flows is lower than its current net book value, we recognize an impairment loss for the difference between the net book value of the asset and its estimated fair value. To the extent we decide to sell an asset, we recognize an impairment loss if the current net book value of the asset exceeds its fair value less selling costs. The above analyses require us to determine whether there are indicators of impairment for individual assets, to estimate the most likely stream of cash flows from operating assets and to determine the fair value of assets that are impaired or held for sale. If our assumptions, projections or estimates regarding an asset change in the future, we may have to record an impairment charge to reduce or further reduce the net book value of such asset. No impairment charges were recorded during the years ended December 31, 2008 and December 31, 2007.

Collectibility of Receivables

We evaluate the collectibility of our rent, mortgage loans and other receivables on a regular basis based on factors including, among others, payment history, the financial strength of the borrower and any guarantors, the value of the underlying collateral, the operations and operating trends of the underlying collateral, if any, the asset type and current economic conditions. If our evaluation of these factors indicates we may not recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. This analysis requires us to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that may not be collected. If our assumptions or estimates regarding the collectibility of a receivable change in the future, we may have to record a reserve to reduce or further reduce the carrying value of the receivable.

Income Taxes

As part of the process of preparing our consolidated financial statements, significant management judgment is required to estimate our compliance with REIT requirements. Our determinations are based on interpretation of tax laws, and our conclusions may have an impact on the income tax expense recognized. Adjustments to income tax expense may be required as a result of i) audits conducted by federal and state tax authorities; ii) our ability to qualify as a REIT; iii) the potential for built-in-gain recognized related to prior-tax-free acquisitions of C corporations; and iv) changes in tax laws. Adjustments required in any given period are included in income, other than adjustments to income tax liabilities acquired in business combinations, which would be adjusted through goodwill.

Impact of New Accounting Pronouncements

On January 1, 2008, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”) for our financial assets and liabilities measured at fair value on a recurring basis. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. SFAS No. 157 also specifies a three-level hierarchy of valuation techniques based upon whether the inputs reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect

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our own assumptions of market participant valuation (unobservable inputs) and requires the use of observable inputs if such data is available without undue cost and effort.

In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. FAS 157-2 Effective Date of FASB Statement No. 157 which delays the effective date of SFAS No. 157 for nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis to January 1, 2009. The adoption of SFAS No. 157 for nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis is not expected to have a material impact on our results of operations or financial position.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 was effective January 1, 2008. On January 1, 2008, we did not elect to apply the fair value option to any specific financial assets or liabilities.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin (“ARB”) No. 51 (“SFAS No. 160”). SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 changes the way the consolidated income statement is presented, thus requiring consolidated net income to be reported at amounts that include the amounts attributable to both the parent and to the noncontrolling interest. SFAS No. 160 is effective January 1, 2009. The adoption of SFAS No. 160 will require the recognition of gains or losses upon changes in control which could have a significant impact on our results of operations and financial position. It will also have a significant impact on our computation of net income and our presentation of the balance sheet and statement of stockholders’ equity.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”). SFAS No. 141R retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. Under SFAS No. 141R, certain transaction costs that have historically been capitalized as acquisition costs will be expensed. SFAS No. 141R is effective for business combinations completed on or after January 1, 2009. The adoption of SFAS No. 141R will require us to expense certain transaction costs for business combinations that were previously capitalized which may have a significant impact on our results of operations and financial position based on historical acquisition costs and activity levels.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 requires enhanced disclosures about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective January 1, 2009. The adoption of SFAS No. 161 is not expected to have a material impact on our results of operations or financial position.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142 and requires enhanced disclosures about (i) the entity’s accounting policy on the treatment of costs incurred to renew or extend the term of a recognized intangible asset, (ii) the weighted average period

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prior to the next renewal or extension (both explicit and implicit), by major intangible asset class in the period of acquisition or renewal and (iii) the total amount of costs incurred in each period presented to renew or extend the term of a recognized intangible asset, by major intangible asset class for entities that capitalize renewal or extension costs. FSP FAS 142-3 is effective January 1, 2009. The adoption of FSP FAS 142-3 is not expected to have a material impact on our results of operations or financial position.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 clarifies that outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders are considered participating securities, and thus, the issuing entity is required to apply the two-class method of computing basic earnings per share as described in SFAS No. 128, Earnings per Share. FSP EITF 03-6-1 is effective January 1, 2009. The adoption of FSP EITF 03-6-1 is not expected to have a material impact on our results of operations but may impact our basic earnings per share.

In November 2008, the Emerging Issues Task Force (“EITF”) reached final consensus on Issue 08-6 Equity Method Investment Accounting Considerations (“EITF 08-6”). EITF 08-6 provides guidance for applying SFAS No. 141R and SFAS No. 160 to equity method investments, specifically how do determine the initial carrying value, assess impairments, account for an investee’s issuance of shares and account for a change from the equity method to the cost method. EITF 08-6 is effective January 1, 2009 to coincide with the effective dates of SFAS No. 141R and SFAS No. 160. See the expected impact of the adoption of SFAS No. 141R and SFAS No. 160 above.

Operating Results

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Triple-net lease rental income increased $17.1 million, or 6%, in 2008 as compared to 2007. The increase was primarily due to rental income from 81 facilities acquired in 2007, 42 facilities acquired during 2008, increased straight-line rental income recognized and rent increases at existing facilities, partially offset by decreased rental income related to 19 facilities that we sold to our unconsolidated joint venture with a state pension fund investor in 2007 and the recognition of $2.4 million of triple-net lease rental income related to non-recurring settlements of delinquent tenant obligations in 2007.

Operating rent was generated by our multi-tenant medical office buildings and increased $44.2 million, or 275%, in 2008 as compared to 2007. The increase was primarily due to operating rent from 30 multi-tenant medical office buildings acquired in 2007, including 22 medical office buildings acquired through consolidated joint ventures, and 10 multi-tenant medical office buildings acquired in 2008, including nine acquired through consolidated joint ventures.

Interest and other income increased $3.1 million, or 14%, in 2008 as compared to 2007. The increase was primarily due to two loans funded and four mortgage loans and five other loans acquired during 2007, six loans funded during 2008 and increased interest income resulting from a higher cash balance primarily due to asset sales, partially offset by loan repayments and the recognition of $1.3 million of other income related to non-recurring settlements of delinquent tenant obligations in 2007.

Interest and amortization of deferred financing costs increased $3.4 million, or 3%, in 2008 as compared to 2007. The increase was primarily due to borrowings to fund acquisitions in 2008 and 2007, including the issuance of $300 million of notes in October 2007, the assumption of $120.8 million of secured debt during 2008 and $55.7 million during 2007 and the addition of $35.8 million of secured debt in one of our consolidated joint ventures in 2008. These factors were partially offset by the repayment of the outstanding balance on our Credit Facility during 2008 using a portion of the net proceeds from the issuance of common stock and the sale of 23 assisted and independent living facilities to Emeritus, the tenant of the facilities, and interest savings from the

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repayment of $110.3 million of senior notes during 2008, the prepayment of $25.4 million of secured debt during 2007 and the transfer of $4.7 million of secured debt during 2007. In addition, $32.6 million of secured debt was transferred to the unconsolidated joint venture we have with a state pension fund investor in connection with our sale of the related facilities to the unconsolidated joint venture during 2007.

Depreciation and amortization increased $26.3 million, or 29%, in 2008 as compared to 2007. The increase was primarily due to the acquisition of 109 facilities in 2007, including 30 multi-tenant medical office buildings, and 52 facilities in 2008, including 10 multi-tenant medical office buildings, partially offset by decreased depreciation and amortization related to 19 facilities that we sold to our unconsolidated joint venture with a state pension fund investor in 2007.

General and administrative expenses increased $1.6 million, or 7%, in 2008 as compared to 2007. The increase was primarily due to increased expenses for third party advisors and employee related costs, offset by a decrease in insurance expense.

Medical office building operating expenses relate to the operations of our multi-tenant medical office buildings and increased $18.0 million, or 210%, in 2008 as compared to 2007. The increase was primarily due to operating expenses from 30 multi-tenant medical office buildings acquired in 2007, including 22 medical office buildings acquired through consolidated joint ventures, and 10 multi-tenant medical office buildings acquired in 2008, including nine acquired through consolidated joint ventures.

Income from unconsolidated joint ventures increased $1.9 million, or 99%, in 2008 as compared to 2007. The increase was primarily due to the acquisition of 34 facilities in 2007 by our unconsolidated joint venture with a state pension fund investor, including 19 facilities acquired by the joint venture from us, partially offset by the acquisition in 2008 of a 50% interest in PMBRES and a 44.95% interest in PMB SB 399-401 East Highland LLC (“PMB SB”) which both reported losses.

Gain on debt extinguishment represents the gain recognized in connection with the prepayment of $49.7 million of senior notes in 2008.

Gain on sale of facilities to unconsolidated joint venture represents 75% of the total gain related to the sale of facilities by us to our unconsolidated joint venture with a state pension fund investor in 2007. The other 25% of the gain, equating to our ownership share of the joint venture, was deferred and is included in the caption “Accounts payable and accrued liabilities” on our balance sheets.

SFAS No. 144 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. If we have a continuing investment, as in the sales to our unconsolidated joint venture with a state pension fund investor, the operating results remain in continuing operations. Discontinued operations income increased $68.2 million in 2008 as compared to 2007. Discontinued operations income of $160.0 million for 2008 was comprised of gains on sale of $155.0 million, rental income of $7.6 million partially offset by depreciation of $1.6 million and interest expense of $1.0 million. Discontinued operations income of $91.8 million for 2007 was comprised of gains on sale of $72.1 million, rental income of $33.7 million partially offset by depreciation of $9.6 million and interest expense of $4.4 million. We expect to have future sales of facilities or reclassifications of facilities to assets held for sale, and the related income or loss would be included in discontinued operations unless the facilities were transferred to an entity in which we maintain an interest.

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Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Triple-net lease rental income increased $68.5 million, or 34%, in 2007 as compared to 2006. The increase was primarily due to rental income from 81 facilities acquired in 2007, 84 facilities acquired during 2006 and rent increases at existing facilities. We also recognized $2.4 million of triple-net lease rental income related to non-recurring settlements of delinquent tenant obligations.

Operating rent was generated by our multi-tenant medical office buildings and increased $6.4 million, or 66%, in 2007 as compared to 2006. The increase was primarily due to operating rent from 30 multi-tenant medical office buildings acquired in 2007, including 22 medical office buildings acquired through our consolidated joint ventures and to recognizing 12 months of rent in 2007 as compared to approximately 11 months of rent in 2006 for 21 multi-tenant medical office buildings acquired in 2006 through one of our consolidated joint ventures.

Interest and other income increased $8.5 million, or 64%, in 2007 as compared to 2006. The increase was primarily due to two loans funded and four mortgage loans and five other loans acquired during 2007, five loans funded during 2006 and commitment fees included in other income, partially offset by loan repayments. We also recognized $1.3 million of other income related to non-recurring settlements of delinquent tenant obligations.

Interest and amortization of deferred financing costs increased $12.1 million, or 14%, in 2007 as compared to 2006. The increase was primarily due to increased borrowings to fund acquisitions in 2007 and 2006, including the issuance of $300 million of notes in October 2007 and $350 million of notes in July 2006, and the assumption of $55.7 million of secured debt during 2007 and $134.5 million during 2006, partially offset by interest savings from the prepayment of $25.4 million of secured debt and the transfer of $4.7 million of secured debt during 2007 and the prepayment of $41.8 million of secured debt during 2006. In addition, $32.6 million of secured debt was transferred to the unconsolidated joint venture we have with a state pension fund investor in connection with our sale of the related facilities to the unconsolidated joint venture.

Depreciation and amortization increased $27.8 million, or 44%, in 2007 as compared to 2006. The increase was primarily due to the acquisition of 109 facilities, including 30 multi-tenant medical office buildings, in 2007 and 105 facilities, including 21 multi-tenant medical office buildings, during 2006.

General and administrative expenses increased $8.8 million, or 56%, in 2007 as compared to 2006. The increase was primarily due to increased compensation expense, including the amortization of stock-based compensation, other performance based awards and increased staff levels, and increases in other general corporate expenses.

Medical office building operating expenses relate to the operations of our multi-tenant medical office buildings and increased $2.5 million, or 40%, in 2007 as compared to 2006. The increase was primarily due to operating expenses from 30 multi-tenant medical office buildings acquired in 2007, including 22 medical office buildings acquired through our consolidated joint ventures and to recognizing 12 months of expense in 2007 as compared to approximately 11 months of expense in 2006 for 21 multi-tenant medical office buildings acquired in 2006 through one of our consolidated joint ventures.

Income from unconsolidated joint venture represents our share of the income generated by our joint venture with a state pension fund investor and our management fee calculated as a percentage of the equity investment in the joint venture. The joint venture made its first investments in March 2007.

Gain on sale of facilities to unconsolidated joint venture represents 75% of the total gain related to the sale of facilities by us to our unconsolidated joint venture with a state pension fund investor in 2007. The other 25% of the gain, equating to our ownership share of the joint venture, was deferred and is included in the caption “Accounts payable and accrued liabilities” on our balance sheets.

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SFAS No. 144 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. If we have a continuing investment, as in the sales to our unconsolidated joint venture, the operating results remain in continuing operations. Discontinued operations income decreased $41.1 million in 2007 as compared to 2006. Discontinued operations income of $91.8 million for 2007 was comprised of gains on sale of $72.1 million, rental income of $33.7 million partially offset by depreciation of $9.6 million and interest expense of $4.4 million. Discontinued operations income of $132.9 million for 2006 was comprised of gains on sale of $96.8 million, rental income of $55.5 million and interest and other income of $0.1 million, partially offset by depreciation of $14.9 million, interest expense of $4.4 million, impairment charges of $0.1 million and general and administrative expenses of $0.1 million. We expect to have future sales of facilities or reclassifications of facilities to assets held for sale, and the related income or loss would be included in discontinued operations unless the facilities were transferred to an entity in which we maintain an interest.

Other Factors That Affect Our Business

Hearthstone Senior Services, L.P.

On June 1, 2006, we acquired 32 assisted living and Alzheimer’s facilities from Hearthstone Assisted Living, Inc. for $431 million. In connection with the acquisition, we leased all of the facilities to Hearthstone Senior Services, L.P. (“Hearthstone”), a new company formed by Hearthstone Assisted Living, Inc.’s President and CEO, Tim Hekker and two partners. Hearthstone’s only operations consist of the management of these 32 facilities. The lease has an initial term of 15 years and provides for a “Base Rent” that started at approximately $34.7 million per year and increases each year by up to 3%. In addition, Hearthstone agreed to pay over the initial term of the lease “Supplemental Rent” equal to a specified percentage of Hearthstone’s annual gross revenue. In accordance with the lease, payment of Supplemental Rent of $1.6 million for the first 24 months of the lease was deferred until June 2008, when it became payable in 12 monthly installments, and Supplemental Rent from June 2008 (initially $127,000 per month) is to be paid quarterly starting in September 2008. None of this Supplemental Rent has been recognized by us as revenue. Additionally, in June 2008, Base Rent increased $89,000 per month.

Hearthstone has failed to pay the deferred Supplemental Rent of $133,000 per month. Hearthstone has notified us that it is currently unable to make such payments and has sought to renegotiate the terms of our lease. As of January 31, 2009, however, Hearthstone is current on all other rent payments required under the lease. We are currently assessing our options for the Hearthstone facilities, which may involve modifying the lease terms, or terminating the lease and finding a new tenant for the facilities. Although we have a $6.0 million letter of credit that secures Hearthstone’s payment obligations to us (which we have not yet drawn on), it is possible that the letter of credit may not be sufficient to compensate us for all costs that may arise in connection with a modification of the lease or our pursuit of other remedies. In addition, at December 31, 2008, we had accrued $4.7 million of straight-line (non-cash) rent receivable from Hearthstone, some or all of which may need to be reserved in the future, depending on our evaluation of its collectibility.

Leases and Mortgage Loans

Our leases and mortgages generally contain provisions under which rents or interest income increase with increases in facility revenues and/or increases in the Consumer Price Index. If facility revenues and/or the Consumer Price Index (which has recently trended negatively) do not increase, our revenues may not increase. Rent levels under renewed leases will also impact revenues. Excluding multi-tenant MOBs, as of December 31, 2008, we had leases on five facilities expiring in 2009. Tenant purchase option exercises would decrease rental income. We believe our tenants may exercise purchase options on assets with option prices totaling approximately $61.1 million during 2009.

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Acquisitions

We expect to make additional acquisitions during 2009, although we cannot predict the quantity and timing of any such acquisitions. As we make additional investments in facilities, depreciation and/or interest expense will also increase. We expect any such increases to be at least partially offset by associated rental or interest income. While additional investments in healthcare facilities would increase revenues, facility sales or mortgage repayments would serve to offset any revenue increases and could reduce revenues.

Liquidity and Capital Resources

Operating Activities

Cash provided by operating activities increased $8.3 million, or 3.5%, in 2008 as compared to 2007. This was primarily due to the collection of certain amounts included in the caption “Other assets” during 2007, increased straight-line rent and other receivables and receivables for reserves, as well as increased medical office building operating expenses, interest and general and administrative expenses, offset in part by revenue increases from our owned facilities and mortgage and other loans as a result of acquisitions and funding of mortgage and other loans during 2007 and 2008. There have been no significant changes in the underlying sources and uses of cash provided by operating activities.

Investing Activities

In February 2008, we entered into an agreement with Pacific Medical Buildings LLC (“PMB”) and certain of its affiliates to acquire up to 18 medical office buildings, including six that are currently in development, for $747.6 million, including the assumption of approximately $282.6 million of mortgage financing. In April 2008, we formed NHP/PMB L.P. (“NHP/PMB”), a limited partnership, to acquire properties from entities affiliated with PMB. During 2008, NHP/PMB acquired PMB’s affiliates’ interests in nine of the 18 medical office buildings, including one property which is included in our triple-net leases segment and eight properties which are multi-tenant medical office buildings (one of which consisted of a 50% interest through a joint venture which is consolidated by NHP/PMB), for $232.2 million, including acquisition costs, which was paid in a combination of cash, the assumption of $120.8 million of mortgage financing and the issuance of 1,829,562 limited partnership units with a fair value at the date of issuance of $58.4 million. During 2008, we also acquired one of the 18 medical office buildings directly (not through NHP/PMB) for $14.7 million, including acquisition costs. Pursuant to the agreement with PMB, certain conditions must be met in order for us to be obligated to purchase the seven remaining medical office buildings. We recently elected to terminate the agreement with respect to one property after the conditions requiring us to close on such property were not met.

Additionally, we entered into another agreement with PMB pursuant to which we currently have the right, but not the obligation, to acquire up to approximately $1 billion of multi-tenant medical office buildings developed by PMB through April 2016.

During 2008, we acquired 18 assisted and independent living facilities, 11 skilled nursing facilities and 12 medical office buildings subject to triple-net master leases in 12 separate transactions for an aggregate investment of $163.0 million. We also funded $43.4 million in expansions, construction and capital improvements at certain facilities in accordance with existing lease provisions. Such expansions, construction and capital improvements generally result in an increase in the minimum rents earned by us on these facilities either at the time of funding or upon completion of the project. At December 31, 2008, we had committed to fund additional expansions, construction and capital improvements of $128.1 million.

During 2008, we acquired, out of bankruptcy, title to one skilled nursing facility securing a previously impaired mortgage loan with a net book value of $2.9 million which approximated our estimate of fair value of the facility and was allocated to land and building. Subsequent to acquiring title to the facility, we entered into a lease for this facility with a third party who was one of our existing tenants.

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During 2008, we acquired the final multi-tenant medical office building of a seven building portfolio through our joint venture with McShane for $2.0 million. We also funded $2.1 million in capital improvements at certain facilities through our joint ventures with McShane and Broe.

During 2008, we also acquired, from an entity affiliated with PMB, a 44.95% investment in two multi-tenant medical office buildings for $3.5 million through PMB SB, an unconsolidated joint venture. Additionally, through our unconsolidated joint venture with a state pension fund, we exercised a purchase option of $21.8 million on one assisted and independent living facility and one skilled nursing facility in which the joint venture previously had leasehold interests. In connection with the purchase option exercise, the joint venture assumed $19.5 million of mortgage financing.

During 2008, we sold 26 assisted and independent living facilities and two skilled nursing facilities. Of the 28 facilities, we sold 23 assisted and independent living facilities to Emeritus Corporation (“Emeritus”), the tenant of the facilities, for a gross purchase price of $305.0 million. In connection with the sale, we retired $55.8 million of secured debt and provided Emeritus with a loan in the amount of $30.0 million (included in the caption “Other assets” on our balance sheets) at a rate of 7.25% per annum for a term of not more than four years. The sale resulted in a gain of $135.0 million which is included in gain on sale of facilities in discontinued operations. We sold the remaining five buildings for a gross purchase price of $36.9 million that resulted in a total gain of $19.9 million which is included in gain on sale of facilities in discontinued operations. We provided financing of $2.5 million for one of the sold properties which was subsequently paid off in September 2008.

During 2008, the Broe I joint venture sold one multi-tenant medical office building for $0.4 million. The sale resulted in a gain of $0.1 million which is included in gain on sale of facilities in discontinued operations.

During 2008, we funded one mortgage loan secured by one skilled nursing facility in the amount of $6.8 million and one mortgage loan secured by one medical office building in the amount of $47.5 million. We also funded an additional $0.8 million on existing mortgage loans.

Financing Activities

At December 31, 2008, we had $700 million available under our $700 million revolving senior unsecured credit facility (“Credit Facility”). At our option, borrowings under the Credit Facility bear interest at the prime rate (3.25% at December 31, 2008) or applicable LIBOR plus 0.85% (1.29% at December 31, 2008). We pay a facility fee of 0.15% per annum on the total commitment under the agreement. The Credit Facility expires on December 15, 2010. The maturity date may be extended by one additional year at our discretion.

Our Credit Facility requires us to maintain, among other things, the financial covenants detailed below:

Covenant	Requirement			Actual
	(Dollar amounts in thousands)
Minimum net asset value	$	820,000		$	2,565,715
Maximum total indebtedness to capitalization value		60	%		38	%
Minimum fixed charge coverage ratio		1.75			2.83
Maximum secured indebtedness ratio		30	%		13	%
Maximum unencumbered asset value ratio		60	%		30	%

Our Credit Facility allows us to exceed the 60% requirements, up to a maximum of 65%, on the maximum total indebtedness to capitalization value and maximum unencumbered asset value ratio for up to two consecutive fiscal quarters. As of December 31, 2008, we were in compliance with all of the above covenants, and we expect to remain in compliance throughout 2009.

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During 2008, in connection with the sale of 23 assisted and independent living facilities to Emeritus, the tenant of the facilities, we prepaid $55.8 million of fixed rate secured debt that bore interest at a weighted average rate of 7.04%. The prepayments were funded by a portion of the net cash proceeds from the sale to Emeritus.

During 2008, we repaid $60.5 million of fixed rate notes with a weighted average rate of 7.17% at maturity and prepaid $49.7 million of fixed rate notes with a weighted average rate of 7.15%. The prepayments resulted in a gain totaling $4.6 million which is reflected as gain on debt extinguishment on our statements of operations. The payments were funded by borrowings on our Credit Facility and by cash on hand.

We anticipate repaying senior notes at maturity with a combination of proceeds from borrowings on our Credit Facility and cash on hand. Borrowings on our Credit Facility could be repaid by potential asset sales or the repayment of mortgage loans receivable, the potential issuance of debt or equity securities under the shelf registration statement discussed below or cash from operations. Our senior notes have been investment grade rated since 1994. Our credit ratings at December 31, 2008 were Baa3 from Moody’s Investors Service, BBB- from Standard & Poor’s Ratings Services and BBB- from Fitch Ratings.

We enter into sales agreements from time to time with Cantor Fitzgerald & Co. to sell shares of our common stock from time to time through a controlled equity offering program. During 2008, we sold 4,955,000 shares of common stock at a weighted average price of $32.24, resulting in net proceeds of $158.1 million after sales fees. During the fourth quarter of 2008, we sold 2,381,000 shares of common stock at a weighted average price of $29.29, resulting in net proceeds of $69.0 million after sales fees.

We sponsor a dividend reinvestment and stock purchase plan that enables existing stockholders to purchase additional shares of common stock by automatically reinvesting all or part of the cash dividends paid on their shares of common stock. The plan also allows investors to acquire shares of our common stock, subject to certain limitations, including a maximum monthly investment of $10,000, at a discount ranging from 0% to 5%, determined by us from time to time in accordance with the plan. The discount during 2008 was 2%. During 2008, we issued approximately 789,000 shares of common stock, at an average price of $28.43, resulting in net proceeds of approximately $22.4 million.

At December 31, 2008, we had a shelf registration statement on file with the Securities and Exchange Commission under which we may issue securities including debt, convertible debt, common and preferred stock. In addition, at December 31, 2008, we had approximately 1,578,000 shares of common stock available for issuance under our dividend reinvestment and stock purchase plan.

Assuming certain conditions are met under our agreement with PMB and we are obligated to close the remaining buildings, we would expect to finance the acquisitions of these buildings with a combination of $161.8 million in assumed debt, the issuance of limited partnership interests in NHP/PMB, cash on hand and borrowings under our Credit Facility.

Financing for other future investments and for the repayment of the obligations and commitments noted above may be provided by cash on hand, borrowings under our Credit Facility discussed above, the sale of debt or equity securities in private placements or public offerings, which may be made under the shelf registration statement discussed above or under new registration statements, proceeds from asset sales or mortgage loan receivable payoffs, the assumption of secured indebtedness, or mortgage financing on a portion of our owned portfolio or through joint ventures. We estimate that, as of December 31, 2008, we could have borrowed up to $1 billion of additional debt, and incurred additional annual interest expense of up to $75.0 million, and remained in compliance with our existing debt covenants.

Recent market and economic conditions have been unprecedented and challenging with tighter credit conditions and slower growth through the latter part of 2008. Continued concerns about the systemic impact of

48

inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market in the U.S. have contributed to diminished expectations for the U.S. economy and financial markets.

As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads. We had $700 million available under our Credit Facility at December 31, 2008, and we have no current reason to believe that we will be unable to access the facility in the future. However, concern about the stability of the markets generally and the strength of borrowers specifically has led many lenders and institutional investors to reduce and, in some cases, cease to provide, funding to borrowers. If we were unable to access our Credit Facility, it could result in an adverse effect on our liquidity and financial condition. In addition, continued turbulence in market conditions may adversely affect the liquidity and financial condition of our tenants.

We have approximately $71.1 million of indebtedness that matures in 2009 and $71.3 million of indebtedness that matures in 2010. Additionally, some of our senior notes can be put to us prior to the stated maturity date. We have approximately $55.0 million of such senior notes that we may be required to repay in 2009 and none that we may be required to repay in 2010. If these market conditions continue, they may limit our ability, and the ability of our tenants, to timely refinance maturing liabilities and access the capital markets to meet liquidity needs, resulting in a material adverse effect on our financial condition and results of operations. Additionally, certain of our debt obligations are floating-rate obligations with interest rate and related payments that vary with the movement of LIBOR or other indexes. If the current market turbulence continues, there could be a rise in interest rates which could reduce our profitability or adversely affect our ability to meet our obligations.

Our plans for growth require regular access to the capital and credit markets. If capital is not available at an acceptable cost, it will significantly impair our ability to make future investments as acquisitions and development projects become difficult or impractical to pursue.

We anticipate the possible sale of certain facilities, primarily due to purchase option exercises. In addition, mortgage loans receivable might be prepaid. In the event that there are facility sales or mortgage loan receivable repayments in excess of new investments, revenues may decrease. We anticipate using the proceeds from any facility sales or mortgage loans receivable repayments to provide capital for future investments, to reduce any outstanding balance on our Credit Facility or to repay other borrowings as they mature. Any such reduction in debt levels would result in reduced interest expense that we believe would partially offset any decrease in revenues. We believe the combination of cash on hand, the ability to draw on our $700 million Credit Facility and the ability to sell securities under the shelf registration statement, as well as our unconsolidated joint venture with a state pension fund investor, provide sufficient liquidity and financing capability to finance anticipated future investments, maintain our current dividend level and repay borrowings at or prior to their maturity, for at least the next 12 months.

Off-Balance Sheet Arrangements

The only off-balance sheet financing arrangements that we currently utilize are the unconsolidated joint ventures discussed in Note 6 to our consolidated financial statements. Except in limited circumstances, our risk of loss is limited to our investment carrying amount.

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Contractual Obligations and Cash Requirements

As of December 31, 2008, our contractual obligations are as follows:

	2009		2010 -2011		2012 -2013		Thereafter		Total
	(In thousands)
Contractual Obligations:
Long-term debt	$	71,071	$	443,399	$	459,212	$	517,750	$	1,491,432
Interest expense	$	90,521	$	161,684	$	89,313	$	243,537	$	585,055
Operating leases	$	473	$	948	$	80	$	—	$	1,501
Commitments:
Capital expenditures	$	55,582	$	52,948	$	19,305	$	—	$	128,105

The long-term debt amount shown above includes our senior notes and our notes and bonds payable.

Interest expense shown above is estimated assuming the interest rates in effect at December 31, 2008 remain constant for the $96.1 million of floating rate notes and bonds payable. Maturities of our senior notes range from 2009 to 2038 (although certain notes may be put back to us at their face amount at the option of the holder at earlier dates) and maturities of our notes and bonds payable range from 2009 to 2037.

Statement Regarding Forward-Looking Disclosure

Certain information contained in this report includes statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements which are not statements of historical facts. These statements may be identified, without limitation, by the use of forward-looking terminology such as “may,” “will,” “anticipates,” “expects,” “believes,” “intends,” “should” or comparable terms or the negative thereof. All forward-looking statements included in this report are based on information available to us on the date hereof. These statements speak only as of the date hereof and we assume no obligation to update such forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements. Risks and uncertainties associated with our business include (without limitation) the following:

• deterioration in the operating results or financial condition, including bankruptcies, of our tenants;

• non-payment or late payment of rent by our tenants;

• our reliance on two tenants for a significant percentage of our revenues;

• occupancy levels at certain facilities;

• our level of indebtedness;

• changes in the ratings of our debt securities;

• access to the capital markets and the cost and availability of capital;

• government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs;

• the general distress of the healthcare industry;

• increasing competition in our business sector;

• the effect of economic and market conditions and changes in interest rates;

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• the amount and yield of any additional investments;

• risks associated with acquisitions, including our ability to identify and complete favorable transactions, delays or failures in obtaining third party consents or approvals, the failure to achieve perceived benefits, unexpected costs or liabilities and potential litigation;

• the ability of our tenants to pay straight-line rent or repay loans in future periods;

• the ability of our tenants to obtain and maintain adequate liability and other insurance;

• our ability to attract new tenants for certain facilities;

• our ability to sell certain facilities for their book value;

• our ability to retain key personnel;

• potential liability under environmental laws;

• the possibility that we could be required to repurchase some of our senior notes;

• the rights and influence of holders of our outstanding preferred stock;

• changes in or inadvertent violations of tax laws and regulations and other factors that can affect our status as a real estate investment trust; and

• the risk factors set forth under the caption “Risk Factors” in Item 1A and other factors discussed from time to time in our news releases, public statements and/or filings with the SEC, including any subsequent quarterly reports on Form 10-Q.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks related to fluctuations in interest rates on our mortgage loans receivable and debt. We may hold derivative instruments to manage our exposure to these risks, and all derivative instruments are matched against specific debt obligations. The purpose of the following analyses is to provide a framework to understand our sensitivity to hypothetical changes in interest rates as of December 31, 2008. Readers are cautioned that many of the statements contained in these paragraphs are forward-looking and should be read in conjunction with our disclosures under the heading “Statement Regarding Forward-Looking Disclosure” set forth above.

We provide mortgage loans to tenants of healthcare facilities as part of our normal operations, which generally have fixed rates, and all mortgage loans receivable are treated as fixed rate notes in the table and analysis below.

We utilize debt financing primarily for the purpose of making additional investments in healthcare facilities. Historically, we have made short-term borrowings on our variable rate unsecured revolving Credit Facility to fund our acquisitions until market conditions were appropriate, based on management’s judgment, to issue stock or fixed rate debt to provide long-term financing.

A portion of our secured debt has variable rates.

During the twelve months ended December 31, 2008, the borrowings under our unsecured revolving Credit Facility have decreased from $41 million to none.

For fixed rate debt, changes in interest rates generally affect the fair market value, but do not impact earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact fair market value, but do affect the future earnings and cash flows. We generally cannot prepay fixed rate debt prior to maturity. Therefore, interest rate risk and changes in fair market value should not have a significant impact on

51

the fixed rate debt until we would be required to refinance such debt. Holding the variable rate debt balance constant, and including the bank borrowings as variable rate debt due to its nature, each one percentage point increase in interest rates would result in an increase in interest expense for the coming year of approximately $1.0 million.

The first table below details the principal amounts and the average interest rates for the mortgage loans receivable and debt for each category based on the final maturity dates as of December 31, 2008. Certain of the mortgage loans receivable and certain items in the various categories of debt require periodic principal payments prior to the final maturity date. The fair value estimates for the mortgage loans receivable are based on the estimates of management and on rates currently prevailing for comparable loans. The fair market value estimates for debt securities are based on discounting future cash flows utilizing rates we would expect to pay for debt of a similar type and remaining maturity.

	Maturity Date
	2009			2010			2011			2012			2013			Thereafter			Total Book Value			Fair Value
	(Dollars in thousands)
Assets
Mortgage loans receivable(1)	$	57,015		$	15,667		$	28,329			—		$	15,828		$	43,060		$	178,575		$	176,315
Average interest rate		7.45	%		10.07	%		10.00	%		—			8.74	%		10.03	%		8.98	%
Liabilities
Debt
Fixed rate	$	38,138		$	71,263		$	344,136		$	109,271		$	340,256		$	492,279		$	1,395,343		$	1,180,398
Average interest rate		7.33	%		5.92	%		6.52	%		7.97	%		6.22	%		6.08	%		6.39	%
Variable rate	$	32,933		$	—		$	28,000		$	9,686		$	—		$	25,470		$	96,089		$	96,089
Average interest rate		6.90	%		—			6.25	%		6.24	%		—			2.79	%		5.56	%
Unsecured revolving credit facility	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Average interest rate		—			—			—			—			—			—			—

(1) Total book value of mortgage loans excludes deferred gains of $18.7 million.

Any future interest rate increases will increase the cost of borrowings on our bank line of credit and any borrowings to refinance long-term debt as it matures or to finance future acquisitions.

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Item 8. Financial Statements and Supplementary Data.

	Page
Report of Independent Registered Public Accounting Firm	54
Consolidated Balance Sheets	55
Consolidated Statements of Operations	56
Consolidated Statements of Stockholders’ Equity	57
Consolidated Statements of Cash Flows	58
Notes to Consolidated Financial Statements	59
Schedule III Real Estate and Accumulated Depreciation	97

53

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Nationwide Health Properties, Inc.

We have audited the accompanying consolidated balance sheets of Nationwide Health Properties, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule listed in Item 15. These financial statements and schedule are the responsibility of the Company’s 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. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nationwide Health Properties, Inc. at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Nationwide Health Properties, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 16, 2009 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Irvine, California

February 16, 2009

54

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

	December 31,
	2008			2007
ASSETS
Investments in real estate
Real estate properties:
Land	$	320,394		$	301,100
Buildings and improvements		3,079,819			2,896,876
		3,400,213			3,197,976
Less accumulated depreciation		(490,112	)		(410,865	)
		2,910,101			2,787,111
Mortgage loans receivable, net		112,399			121,694
Mortgage loan receivable from related party		47,500			—
Investment in unconsolidated joint ventures		54,299			52,637
		3,124,299			2,961,442
Cash and cash equivalents		82,250			19,407
Receivables, net		6,066			3,808
Assets held for sale		4,542			—
Intangible assets		109,434			58,481
Other assets		131,534			101,215
	$	3,458,125		$	3,144,353
LIABILITIES AND STOCKHOLDERS’ EQUITY
Credit facility	$	—		$	41,000
Senior notes		1,056,233			1,166,500
Notes and bonds payable		435,199			340,150
Accounts payable and accrued liabilities		144,566			107,844
Total liabilities		1,635,998			1,655,494
Minority interests		61,460			6,166
Commitments and contingencies
Stockholders’ equity:
Preferred stock $1.00 par value; 5,000,000 shares authorized;
7.750% Series B Convertible, 749,184 and 1,064,450 shares issued and outstanding at December 31, 2008 and 2007, respectively, stated at liquidation preference of $100 per share		74,918			106,445
Common stock $0.10 par value; 200,000,000 shares authorized; issued and outstanding: 102,279,940 and 94,805,781 as of December 31, 2008 and 2007, respectively		10,228			9,481
Capital in excess of par value		1,786,193			1,565,249
Cumulative net income		1,556,889			1,288,751
Accumulated other comprehensive income		1,846			2,561
Cumulative dividends		(1,669,407	)		(1,489,794	)
Total stockholders’ equity		1,760,667			1,482,693
	$	3,458,125		$	3,144,353

See accompanying notes.

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NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Years ended December 31,
	2008			2007			2006
Revenues:
Rental income:
Triple net lease rent	$	285,398		$	268,346		$	199,851
Operating rent		60,287			16,061			9,700
		345,685			284,407			209,551
Interest and other income		24,980			21,862			13,359
		370,665			306,269			222,910
Expenses:
Interest and amortization of deferred financing costs		101,045			97,639			85,541
Depreciation and amortization		117,473			91,187			63,380
General and administrative		26,051			24,429			15,654
Medical office building operating expenses		26,631			8,596			6,122
		271,200			221,851			170,697
Income before unconsolidated entity and minority interests		99,465			84,418			52,213
Income from unconsolidated joint ventures		3,903			1,958			—
Minority interests in net loss of consolidated joint ventures		131			212			421
Gain on debt extinguishment, net		4,641			—			—
Gain on sale of facilities to unconsolidated joint venture, net		—			46,045			—
Income from continuing operations		108,140			132,633			52,634
Discontinued operations:
Gain on sale of facilities, net		154,995			72,069			96,791
Income from discontinued operations		5,003			19,756			36,152
		159,998			91,825			132,943
Net income		268,138			224,458			185,577
Preferred stock dividends		(7,637	)		(13,434	)		(15,163	)
Income available to common stockholders	$	260,501		$	211,024		$	170,414
Basic per share amounts:
Income from continuing operations available to common stockholders	$	1.03		$	1.32		$	0.48
Discontinued operations		1.65			1.01			1.72
Income available to common stockholders	$	2.68		$	2.33		$	2.20
Basic weighted average shares outstanding		97,246			90,625			77,489
Diluted per share amounts:
Income from continuing operations available to common stockholders	$	1.02		$	1.31		$	0.48
Discontinued operations		1.62			1.01			1.71
Income available to common stockholders	$	2.64		$	2.32		$	2.19
Diluted weighted average shares outstanding		98,855			91,129			77,879

See accompanying notes.

56

NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

	Preferred Stock					Common stock			Capital in excess of par value		Cumulative net income		Accumulated other comprehensive income			Cumulative dividends			Total stockholders’ equity
	Shares		Amount			Shares	Amount
Balances at December 31, 2005	1,965		$	196,499		67,811	$	6,781	$	889,008	$	878,716	$	—		$	(1,189,972	)	$	781,032
Comprehensive income:
Net income	—			—		—		—		—		185,577		—			—			185,577
Gain on Treasury lock agreements	—			—		—		—		—		—		1,204			—			1,204
Amortization of gain on Treasury lock agreements	—			—		—		—		—		—		(103	)		—			(103	)
SFAS No. 158 adoption adjustment	—			—		—		—		—		—		130			—			130
Comprehensive income	—			—		—		—		—		—		—			—			186,808
Issuance of common stock	—			—		18,427		1,843		409,533		—		—			—			411,376
Stock option amortization	—			—		—		—		162		—		—			—			162
Preferred dividends	—			—		—		—		—		—		—			(15,163	)		(15,163	)
Common dividends	—			—		—		—		—		—		—			(120,406	)		(120,406	)
Balances at December 31, 2006	1,965			196,499		86,238		8,624		1,298,703		1,064,293		1,231			(1,325,541	)		1,243,809
Comprehensive income:
Net income	—			—		—		—		—		224,458		—			—			224,458
Gain on Treasury lock agreements	—			—		—		—		—		—		1,557			—			1,557
Amortization of gain on Treasury lock agreements	—			—		—		—		—		—		(279	)		—			(279	)
Defined benefit pension plan net actuarial gain	—			—		—		—		—		—		52			—			52
Comprehensive income	—			—		—		—		—		—		—			—			225,788
Redemption of preferred stock	(901	)		(90,049	)	—		—		—		—		—			—			(90,049	)
Conversion of preferred stock	—			(5	)	—		5		—		—		—			—			—
Issuance of common stock	—			—		8,568		852		266,546		—		—			—			267,398
Preferred dividends	—			—		—		—		—		—		—			(13,434	)		(13,434	)
Common dividends	—			—		—		—		—		—		—			(150,819	)		(150,819	)
Balances at December 31, 2007	1,064			106,445		94,806		9,481		1,565,249		1,288,751		2,561			(1,489,794	)		1,482,693
Comprehensive income:
Net income	—			—		—		—		—		268,138		—			—			268,138
Amortization of gain on Treasury lock agreements	—			—		—		—		—		—		(511	)		—			(511	)
Defined benefit pension plan net actuarial loss	—			—		—		—		—		—		(204	)		—			(204	)
Comprehensive income	—			—		—		—		—		—		—			—			267,423
Conversion of preferred stock	(315	)		(31,527	)	1,406		140		31,387		—		—			—			—
Issuance of common stock	—			—		6,068		607		189,557		—		—			—			190,164
Preferred dividends	—			—		—		—		—		—		—			(7,637	)		(7,637	)
Common dividends	—			—		—		—		—		—		—			(171,976	)		(171,976	)
Balances at December 31, 2008	749		$	74,918		102,280	$	10,228	$	1,786,193	$	1,556,889	$	1,846		$	(1,669,407	)	$	1,760,667

See accompanying notes.

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NATIONWIDE HEALTH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years ended December 31,
	2008			2007			2006
Cash flows from operating activities:
Net income	$	268,138		$	224,458		$	185,577
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		119,107			100,794			78,261
Stock-based compensation		5,800			4,733			1,701
Gain on sale of facilities, net		(154,995	)		(118,114	)		(96,791	)
Gain on debt extinguishment, net		(4,641	)		—			—
Impairment of assets		—			—			83
Amortization of deferred financing costs		2,662			2,523			2,673
Mortgage loan premium amortization		111			257			—
Straight-line rent		(10,263	)		(2,886	)		(786	)
Loss (income) from unconsolidated joint ventures		37			(440	)		—
Distributions of income from unconsolidated joint ventures		236			440			—
Minority interests in net loss of consolidated joint ventures		(139	)		(212	)		—
Changes in operating assets and liabilities:
Receivables		(2,258	)		3,761			(2,046	)
Other assets		(814	)		16,833			(15,933	)
Assets held for sale		(12	)		—			—
Accounts payable and accrued liabilities		25,881			8,381			22,679
Net cash provided by operating activities		248,850			240,528			175,418
Cash flows from investing activities:
Acquisition of real estate and related assets and liabilities		(325,216	)		(670,522	)		(874,824	)
Proceeds from sale of real estate facilities		288,639			314,066			203,991
Investment in mortgage and other loans receivable		(91,357	)		(48,083	)		(5,815	)
Principal payments on mortgage loans receivable		13,769			16,838			18,343
Contributions to unconsolidated joint ventures		(6,678	)		(34,023	)		—
Distributions from unconsolidated joint ventures		4,743			26,718			—
Net cash used in investing activities		(116,100	)		(395,006	)		(658,305	)
Cash flows from financing activities:
Borrowings under credit facility		169,000			1,009,000			759,000
Repayment of borrowings under credit facility		(210,000	)		(1,107,000	)		(844,000	)
Borrowings under bridge facility		—			—			200,000
Repayment of borrowings under bridge facility		—			—			(200,000	)
Issuance of senior unsecured debt		—			297,323			346,703
Repayments of senior unsecured debt		(105,626	)		(21,000	)		(32,725	)
Settlement of cash flow hedges		—			1,610			1,204
Issuance of notes and bonds payable		36,461			911			32,018
Principal payments on notes and bonds payable		(18,522	)		(34,542	)		(47,414	)
Issuance of common stock, net		183,819			261,756			409,066
Repurchase of preferred stock		—			(90,049	)		—
Contributions from minority interests		59,055			5,210			1,910
Distributions to minority interests		(3,479	)		(97	)		(224	)
Dividends paid		(179,133	)		(163,482	)		(135,498	)
Deferred financing costs		(1,482	)		(450	)		(2,463	)
Net cash provided by (used in) financing activities		(69,907	)		159,190			487,577
Increase in cash and cash equivalents		62,843			4,712			4,690
Cash and cash equivalents, beginning of year		19,407			14,695			10,005
Cash and cash equivalents, end of year	$	82,250		$	19,407		$	14,695
Supplemental schedule of cash flow information:
Non-cash investing activity—foreclosure of facility securing mortgage loan receivable	$	2,945		$	7,664		$	—
Interest paid	$	98,028		$	96,234		$	78,447

See accompanying notes.

58

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008

1. Organization

Nationwide Health Properties, Inc., a Maryland corporation, is a real estate investment trust (“REIT”) that invests primarily in healthcare related senior housing, long-term care properties and medical office buildings. Whenever we refer herein to “NHP” or to “us” or use the terms “we” or “our,” we are referring to Nationwide Health Properties, Inc. and its subsidiaries, unless the context otherwise requires.

We primarily make our investments by acquiring an ownership interest in senior housing and long-term care facilities and leasing them to unaffiliated tenants under “triple-net” “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. We also invest in medical office buildings which are not generally subject to “triple-net” leases and generally have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). Some of the medical office buildings are subject to “triple-net” leases. In addition, but to a much lesser extent because we view the risks of this activity to be greater due to less favorable bankruptcy treatment and other factors, from time to time, we extend mortgage loans and other financing to tenants. For the twelve months ended December 31, 2008, approximately 93% of our revenues are derived from our leases, with the remaining 7% from our mortgage loans and other financing activities.

We believe we have operated in such a manner as to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. We intend to continue to qualify as such and therefore to distribute at least 90% of our REIT taxable income (computed without regard to the dividends paid deduction and excluding capital gain) to our stockholders. If we qualify for taxation as a REIT, and we distribute 100% of our taxable income to our stockholders, we will generally not be subject to U.S. federal income taxes on our income that is distributed to stockholders. Accordingly, no provision has been made for federal income taxes.

As of December 31, 2008, we had investments in 583 healthcare facilities and one land parcel located in 43 states, consisting of:

Consolidated facilities:

• 251 assisted and independent living facilities;

• 172 skilled nursing facilities;

• 10 continuing care retirement communities;

• 7 specialty hospitals;

• 19 triple-net medical office buildings, one of which is operated by a consolidated joint venture (see Note 5);

• 60 multi-tenant medical office buildings, 51 of which are operated by consolidated joint ventures (see Note 5); and

• 1 asset held for sale.

Unconsolidated facilities:

• 19 assisted and independent living facilities;

• 14 skilled nursing facilities;

• 1 continuing care retirement community; and

• 2 multi-tenant medical office buildings.

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NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

Mortgage loans secured by:

• 17 skilled nursing facilities;

• 9 assisted and independent living facilities;

• 1 medical office building; and

• 1 land parcel.

As of December 31, 2008, our directly owned facilities, other than our multi-tenant medical office buildings, most of which are operated by our consolidated joint ventures (see Note 5), were operated by 84 different healthcare providers, including the following publicly traded companies:

	Number of Facilities Operated
•      Assisted Living Concepts, Inc.	4
•      Brookdale Senior Living, Inc.	96
•      Emeritus Corporation	6
•      Extendicare, Inc.	1
•      HEALTHSOUTH Corporation	2
•      Kindred Healthcare, Inc.	1
•      Sun Healthcare Group, Inc.	4

Two of our triple-net lease tenants each accounted for more than 10% of our revenues at December 31, 2008, as follows:

•      Brookdale Senior Living, Inc.	15.2%
•      Hearthstone Senior Services, L.P.	10.6%

2. Summary of Significant Accounting Policies

Basis of Presentation

Certain items in prior period financial statements have been reclassified to conform to current year presentation, including those required by Statement of Financial Accounting Standards (“SFAS”) No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”).

Principles of Consolidation

The consolidated financial statements include our accounts, the accounts of our wholly-owned subsidiaries and the accounts of our majority owned and controlled joint ventures in accordance with accounting principles generally accepted in the United States (“GAAP”), including Financial Accounting Standards Board (“FASB”) Interpretation No. 46R Consolidation of Variable Interest Entities and Emerging Issues Task Force (“EITF”) Issue 04-5 Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights. All material intercompany accounts and transactions have been eliminated.

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NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

Investments in entities that we do not consolidate but for which we have the ability to exercise significant influence over operating and financial policies are reported under the equity method. Under the equity method of accounting, our share of the entity’s earnings or losses is included in our operating results.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Revenue Recognition

Rental income from operating leases is recognized in accordance with GAAP, including SFAS No. 13 Accounting for Leases and SEC Staff Accounting Bulletin (“SAB”) No. 101 Revenue Recognition, as amended by SEC SAB No. 104. Our leases generally contain annual escalators. Many of our leases contain non-contingent rent escalators for which we recognize income on a straight-line basis over the lease term. Recognizing income on a straight-line basis requires us to calculate the total non-contingent rent to be paid over the life of a lease and to recognize the revenue evenly over that life. This method results in rental income in the early years of a lease being higher than actual cash received, creating a straight-line rent receivable asset included in the caption “Other assets” on our balance sheets. At some point during the lease, depending on its terms, the cash rent payments eventually exceed the straight-line rent which results in the straight-line rent receivable asset decreasing to zero over the remainder of the lease term. We assess the collectibility of straight-line rents in accordance with the applicable accounting standards and our reserve policy and defer recognition of straight-line rent if its collectibility is not reasonably assured. Certain leases contain escalators contingent on revenues or other factors, including increases based on changes in the Consumer Price Index. Such revenue increases are recognized over the lease term as the related contingencies are met.

Our assessment of the collectibility of straight-line rents is based on several factors, including the financial strength of the tenant and any guarantors, the historical operations and operating trends of the facility, the historical payment pattern of the tenant, the type of facility and whether we intend to continue to lease the facility to the current tenant, among others. If our evaluation of these factors indicates we may not receive the rent payments due in the future, we defer recognition of the straight-line rental income and, depending on the circumstances, we will provide a reserve against the previously recognized straight-line rent receivable asset for a portion, up to its full value, that we estimate may not be recoverable. If we change our assumptions or estimates regarding the collectibility of future rent payments required by a lease change, we may adjust our reserve to increase or reduce the rental revenue recognized, and/or to increase or reduce the reserve against the existing straight-line rent receivable balance.

We recorded $10.3 million of revenues in excess of cash received during 2008, $2.9 million of revenues in excess of cash received during 2007 and $0.8 million of revenues in excess of cash during 2006. We have straight-line rent receivables recorded under the caption “Other assets” on our balance sheets of $21.2 million at December 31, 2008 and $10.7 million at December 31, 2007, net of reserves of $90.7 million and $79.4 million, respectively. We evaluate the collectibility of the straight-line rent receivable balances on an ongoing basis and provide reserves against receivables we believe may not be fully recoverable. The ultimate amount of straight-line rent we realize could be less than amounts currently recorded.

61

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

Gain on Sale of Facilities

We recognize sales of facilities only upon closing. Payments received from purchasers prior to closing are recorded as deposits. Gains on facilities sold are recognized using the full accrual method upon closing when the collectibility of the sales price is reasonably assured, we have received adequate initial investment from the buyer, we are not obligated to perform significant activities after the sale to earn the gain and other profit recognition criteria have been satisfied. Gains may be deferred in whole or in part until the sales satisfy the requirements of gain recognition on sales of real estate under SFAS No. 66 Accounting for Sales of Real Estate. In accordance with SFAS No. 144, gains on facilities sold to unconsolidated joint ventures in which we maintain an ownership interest are included in income from continuing operations, and the portion of the gain representing our retained ownership interest in the joint venture is deferred and included in the caption “Accounts payable and accrued liabilities” on our balance sheets. All other gains are included in discontinued operations.

Asset Impairment

We review our long-lived assets individually on a quarterly basis to determine if there are indicators of impairment in accordance with SFAS No. 144. Indicators may include, among others, the tenant’s inability to make rent payments, operating losses or negative operating trends at the facility level, notification by a tenant that it will not renew its lease, a decision to dispose of an asset or adverse changes in the fair value of any of our properties. For operating assets, if indicators of impairment exist, we compare the future estimated undiscounted cash flows from the expected use of the property to its net book value to determine if impairment exists. If the sum of the future estimated undiscounted cash flows is higher than the current net book value, in accordance with SFAS No. 144, we conclude no impairment exists. If the sum of the future estimated undiscounted cash flows is lower than its current net book value, we recognize an impairment loss for the difference between the net book value of the asset and its estimated fair value. To the extent we decide to sell an asset, we recognize an impairment loss if the current net book value of the asset exceeds its fair value less selling costs. The above analyses require us to determine whether there are indicators of impairment for individual assets, to estimate the most likely stream of cash flows from operating assets and to determine the fair value of assets that are impaired or held for sale. If our assumptions, projections or estimates regarding an asset change in the future, we may have to record an impairment charge to reduce or further reduce the net book value of the asset.

Collectibility of Receivables

We evaluate the collectibility of our rent, mortgage loans and other receivables on a regular basis based on factors including, among others, payment history, the financial strength of the borrower and any guarantors, the value of the underlying collateral, the operations and operating trends of the underlying collateral, if any, the asset type and current economic conditions. If our evaluation of these factors indicates we may not recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate may not be recovered. This analysis requires us to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that may not be collected. We had reserves included in the caption “Receivables, net” of $5.4 million as of December 31, 2008 and $2.7 million as of December 31, 2007. If our assumptions or estimates regarding the collectibility of a receivable change in the future, we may have to record a reserve to reduce or further reduce the carrying value of the receivable.

Accounting for Stock-Based Compensation

In 1999, we adopted the accounting provisions of SFAS No. 123 Accounting for Stock-Based Compensation (“SFAS No. 123”). In 2005, we adopted SFAS No. 123 (revised 2004) Share-Based Payment (“SFAS

62

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

No. 123R”). SFAS No. 123 and SFAS No. 123R established a fair value based method of accounting for stock-based compensation. Accounting for stock-based compensation under SFAS No. 123 and SFAS No. 123R requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period and requires any dividend equivalents earned to be treated as dividends for financial reporting purposes. Stock-based compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period. Net income reflects stock-based compensation expense of $5.8 million in 2008, $4.7 million in 2007 and $1.9 million in 2006.

Land, Buildings and Improvements and Depreciation and Useful Lives of Assets

We record properties at cost and use the straight-line method of depreciation for buildings and improvements over their estimated remaining useful lives of up to 40 years, generally 20 to 40 years. We review and adjust useful lives periodically. Depreciation expense from continuing operations was $105.0 million in 2008, $86.2 million in 2007 and $59.3 million in 2006.

We allocate purchase prices in accordance with SFAS No. 141, Business Combinations (“SFAS No. 141”). For our triple-net leased facilities, a significant portion of the cost of each property is allocated to buildings. This amount generally approximates 90%. We allocate the purchase price of a property based on management’s estimate of its fair value among land, building and, if applicable, equipment as if the property were vacant. Historically, we have generally acquired properties and simultaneously entered into a new market rate lease for the entire property with one tenant. For our multi-tenant medical office buildings, the percentage allocated to buildings may be substantially lower as allocations are made to assets such as lease-up intangible assets, above market tenant and ground lease intangible assets and in-place lease intangible assets (collectively “intangible assets”) included on our balance sheets and/or below market tenant and ground lease intangible liabilities included in the caption “Accounts payable and accrued liabilities” on our balance sheets. We amortize intangible assets and liabilities over the remaining lease terms of the respective leases to real estate amortization expense or operating rent, as appropriate.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments with original maturities of three months or less when purchased.

Derivatives

In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We endeavor to limit these risks by following established risk management policies, procedures and strategies, including, on occasion, the use of financial instruments. We do not use financial instruments for trading or speculative purposes.

Financial instruments are recorded on the balance sheet as assets or liabilities based on each instrument’s fair value. Changes in the fair value of financial instruments are recognized currently in earnings, unless the financial instrument meets the criteria for hedge accounting contained in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted (“SFAS No. 133”). If the financial instruments meet the criteria for a cash flow hedge, the gains and losses in the fair value of the financial instrument are recorded in other comprehensive income. Gains and losses on a cash flow hedge are reclassified into earnings when the forecasted transaction affects earnings. A contract that is designated as a hedge of an anticipated transaction which is no longer likely to occur is immediately recognized in earnings.

63

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

Segment Reporting

We report our consolidated financial statements in accordance with SFAS No. 131 Disclosures about Segments of an Enterprise and Related Information. We operate in two segments based on our investment and leasing activities: triple-net leases and multi-tenant leases (see Note 24).

Minority Interests

NHP/PMB L.P. (“NHP/PMB”) is a limited partnership that we formed in April 2008 to acquire properties from entities affiliated with Pacific Medical Buildings LLC (“PMB”) (see Note 5). We consolidate NHP/PMB consistent with the provisions of EITF 04-5, as our wholly owned subsidiary is the general partner and exercises control. As of December 31, 2008, third party investors owned 1,829,562 limited partnership units in NHP/PMB, which represents 60.7% of the total units outstanding. After a one year holding period, these limited partnership units are exchangeable for cash or, at our option, shares of our common stock, initially on a one-for-one basis. At December 31, 2008, the cost basis of the limited partnership units held by minority interests was $56.8 million.

We also have two consolidated joint ventures with The Broe Companies (“Broe”) and one consolidated joint venture with McShane Medical Office Properties, Inc. (“McShane”) that invest in multi-tenant medical office buildings (see Note 5). The cost of the minority interests for these joint ventures was $4.2 million at December 31, 2008 and $6.2 million at December 31, 2007.

Fair Value

On January 1, 2008, we adopted the provisions of SFAS No. 157, Fair Value Measurements (“SFAS No. 157”) for our financial assets and liabilities measured at fair value on a recurring basis. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. SFAS No. 157 also specifies a three-level hierarchy of valuation techniques based upon whether the inputs reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect our own assumptions of market participant valuation (unobservable inputs) and requires the use of observable inputs if such data is available without undue cost and effort. At December 31, 2008, we had $3.7 million of financial assets and $3.7 million of financial liabilities classified as Level 1 and thus measured at fair value using quoted market prices for identical instruments in active markets from an independent third party source.

In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 Effective Date of FASB Statement No. 157 which delays the effective date of SFAS No. 157 for nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis to January 1, 2009. The adoption of SFAS No. 157 for nonfinancial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis is not expected to have a material impact on our results of operations or financial position.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 was effective January 1, 2008. On January 1, 2008, we did not elect to apply the fair value option to any specific financial assets or liabilities.

64

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

The carrying amount of cash and cash equivalents approximates fair value because of the short maturities of these instruments. The fair values of mortgage loans receivable are based upon the estimates of management and on rates currently prevailing for comparable loans. The fair value of long-term debt is estimated based on discounting future cash flows utilizing current rates offered to us for debt of a similar type and remaining maturity.

The table below details the fair values and book values for mortgage loans receivable and the components of long-term debt at December 31, 2008.

	Book Value		Fair Value
	(In thousands)
Mortgage loans receivable	$	178,575	$	176,315
Credit facility	$	—	$	—
Senior notes due 2009-2038	$	1,056,233	$	858,254
Notes and bonds payable	$	435,199	$	418,233

Impact of New Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin (“ARB”) No. 51 (“SFAS No. 160”). SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 changes the way the consolidated income statement is presented, thus requiring consolidated net income to be reported at amounts that include the amounts attributable to both the parent and to the noncontrolling interest. SFAS No. 160 is effective January 1, 2009. The adoption of SFAS No. 160 will require the recognition of gains or losses upon changes in control which could have a significant impact on our results of operations and financial position. It will also have a significant impact on our computation of net income and our presentation of the balance sheet and statement of stockholders’ equity.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”). SFAS No. 141R retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. Under SFAS No. 141R, certain transaction costs that have historically been capitalized as acquisition costs will be expensed. SFAS No. 141R is effective for business combinations completed on or after January 1, 2009. The adoption of SFAS No. 141R will require us to expense certain transaction costs for business combinations that were previously capitalized which may have a significant impact on our results of operations and financial position based on historical acquisition costs and activity levels.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 requires enhanced disclosures about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective January 1, 2009. The adoption of SFAS No. 161 is not expected to have a material impact on our results of operations or financial position.

65

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2008

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142 and requires enhanced disclosures about (i) the entity’s accounting policy on the treatment of costs incurred to renew or extend the term of a recognized intangible asset, (ii) the weighted average period prior to the next renewal or extension (both explicit and implicit), by major intangible asset class in the period of acquisition or renewal and (iii) the total amount of costs incurred in each period presented to renew or extend the term of a recognized intangible asset, by major intangible asset class for entities that capitalize renewal or extension costs. FSP FAS 142-3 is effective January 1, 2009. The adoption of FSP FAS 142-3 is not expected to have a material impact on our results of operations or financial position.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 clarifies that outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders are considered participating securities, and thus, the issuing entity is required to apply the two-class method of computing basic earnings per share as described in SFAS No. 128, Earnings per Share. FSP EITF 03-6-1 is effective January 1, 2009. The adoption of FSP EITF 03-6-1 is not expected to have a material impact on our results of operations but may impact our basic earnings per share.

In November 2008, the EITF reached final consensus on Issue 08-6 Equity Method Investment Accounting Considerations (“EITF 08-6”). EITF 08-6 provides guidance for applying SFAS No. 141R and SFAS No. 160 to equity method investments, specifically how to determine the initial carrying value, assess impairments, account for an investee’s issuance of shares and account for a change from the equity method to the cost method. EITF 08-6 is effective January 1, 2009 to coincide with the effective dates of SFAS No. 141R and SFAS No. 160. See the expected impact of the adoption of SFAS No. 141R and SFAS No. 160 above.

3. Real Estate Properties

At December 31, 2008, we had direct ownership of:

• 251 assisted and independent living facilities;

• 172 skilled nursing facilities;

• 10 continuing care retirement communities;

• 7 specialty hospitals;

• 19 triple-net medical office buildings, one of which is operated by a consolidated joint venture (see Note 5); and

• 60 multi-tenant medical office buildings, 51 of which are operated by consolidated joint ventures (see Note 5).

We lease our owned senior housing and long-term care facilities and certain medical office buildings to single tenants under “triple-net”, and in most cases, “master” leases that are accounted for as operating leases. These leases generally have an initial term of up to 21 years and generally have two or more multiple-year renewal options. As of December 31, 2008, approximately 84% of these facilities were leased under master leases. In addition, the majority of these leases contain cross-collateralization and cross-default provisions tied to other leases with the same tenant, as well as grouped lease renewals and grouped purchase options. As of

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December 31, 2008

December 31, 2008, leases covering 424 facilities were backed by security deposits consisting of irrevocable letters of credit or cash totaling $72.7 million. Under terms of the leases, the tenant is responsible for all maintenance, repairs, taxes, insurance and capital expenditures on the leased properties. As of December 31, 2008, leases covering 339 facilities contained provisions for property tax impounds, and leases covering 210 facilities contained provisions for capital expenditure impounds. We generally lease medical office buildings to multiple tenants under separate non triple-net leases, where we are responsible for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). Some of the medical office buildings are subject to triple-net leases, where the lessees are responsible for the associated operating expenses. No individual property owned by us is material to us as a whole.

Future minimum rentals on non-cancelable leases, including medical office building leases, as of December 31, 2008 are as follows:

Year	Rentals		Year	Rentals
	(In thousands)			(In thousands)
2009	$	336,607	2014	$	247,182
2010		325,957	2015		233,492
2011		307,968	2016		206,764
2012		291,646	2017		188,718
2013		265,790	2018		176,869
			Thereafter		601,893

During 2008, we acquired 18 assisted and independent living facilities, 11 skilled nursing facilities and 12 medical office buildings subject to triple-net master leases in 12 separate transactions for an aggregate investment of $163.0 million. We also acquired, from entities affiliated with PMB, one multi-tenant medical office building for $14.7 million and, through NHP/PMB, one triple-net medical office building and eight multi-tenant medical office buildings (one of which consisted of a 50% interest through a joint venture which is consolidated by NHP/PMB) for $232.2 million (see Note 5). We also acquired, from an entity affiliated with PMB, a 44.95% investment in two multi-tenant medical office buildings for $3.5 million through PMB SB 399-401 East Highland LLC (“PMB SB”), an unconsolidated joint venture (see Note 6). We acquired one multi-tenant medical office building through our consolidated joint venture with McShane for $2.0 million (see Note 5).

Included in the cost of the acquisitions from PMB affiliates is $7.8 million of accrued acquisition costs at December 31, 2008. These accrued acquisition costs will be paid to PMB and its affiliates and are calculated based on the properties that have closed to date. If we acquire more buildings under this agreement, this amount would increase.

Additionally, we entered into another agreement with PMB pursuant to which we currently have the right, but not the obligation, to acquire up to approximately $1 billion of multi-tenant medical office buildings developed by PMB through April 2016.

During 2008, we acquired, out of bankruptcy, title to one skilled nursing facility securing a previously impaired mortgage loan with a net book value of $2.9 million which approximated our estimate of fair value of the facility and was allocated to land and building (see Note 4). Subsequent to acquiring title to the facility, we entered into a lease for this facility with a third party who was one of our existing tenants.

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December 31, 2008

During 2008, we also funded $43.4 million in expansions, construction and capital improvements at certain facilities in accordance with existing lease provisions. Such expansions, construction and capital improvements generally result in an increase in the minimum rents earned by us on these facilities either at the time of funding or upon completion of the project. At December 31, 2008, we had committed to fund additional expansions, construction and capital improvements of $128.1 million.

During 2008, we transferred 24 assisted and independent living facilities and one skilled nursing facility to assets held for sale (see Note 7). All but one of these assets were sold as of December 31, 2008.

During 2008, we sold three assisted and independent living facilities and one skilled nursing facility, each not previously transferred to assets held for sale, for a gross purchase price of $31.9 million. The sales resulted in a total gain of $17.6 million that is included in gain on sale of facilities in discontinued operations. We provided financing of $2.5 million for one of the sold properties which was subsequently paid off in September 2008.

During 2007, we acquired 40 assisted and independent living facilities, 29 skilled nursing facilities, three continuing care retirement communities and six triple-net medical office buildings in 18 separate transactions for an aggregate investment of $436.9 million, including the assumption of $38.1 million of mortgage financing and $7.3 million of security deposits and other holdback items. We also acquired eight multi-tenant medical office buildings in two separate transactions for an aggregate investment of $132.0 million, including the assumption of $8.4 million of mortgage financing and $0.1 million of security deposits and other holdback items. The aggregate investment of $568.9 million was allocated $545.2 million to real estate with the remaining $23.7 million to other assets and liabilities. We also acquired 22 multi-tenant medical office buildings through our consolidated joint ventures (see Note 5).

During 2007, we acquired title to one continuing care retirement community securing an impaired mortgage loan with a balance of $7.7 million which approximated our estimate of fair value of the facility and was allocated to land and building (see Note 4). In connection with acquiring title to the facility, we entered into a lease for this facility with the former borrower.

During 2007, we also funded $22.2 million in expansions, construction and capital improvements at certain triple-net leased facilities in accordance with existing lease provisions.

During 2007, we sold 14 assisted and independent living facilities, four skilled nursing facilities and one continuing care retirement community in four separate transactions to the unconsolidated joint venture we have with a state pension fund investor for $226.7 million from which we received net cash proceeds of $161.5 million ($31.3 million representing our retained ownership interest in the joint venture, and $33.9 million representing debt and other liabilities assumed by the joint venture). The related leases were transferred to the joint venture. The sales resulted in a gain of $61.4 million, of which $46.0 million is included in gain on sale of facilities to unconsolidated joint venture in continuing operations ($15.4 million representing that portion of the gain attributable to our retained ownership interest in the joint venture, which was deferred).

During 2007, we sold seven skilled nursing facilities and one independent and assisted living facility to the tenants of the facilities pursuant to purchase options, none of which were previously transferred to assets held for sale, for net cash proceeds of $43.2 million. In connection with the sale of one of the skilled nursing facilities, we transferred one mortgage with a balance of $4.7 million to the tenant of the facility. We sold one skilled nursing facility to the tenant of the facility for net cash proceeds of $1.1 million. The sales resulted in a total gain of $11.4 million that is included in gain on sale of facilities in discontinued operations.

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December 31, 2008

During 2007, we provided one mortgage loan for $14.1 million related to the sale of three assisted and independent living facilities to the former tenant, partially offset by a deferred gain of $4.1 million that will be recognized in proportion to principal payments received (see Note 4).

During 2007, we sold 36 skilled nursing facilities leased to Complete Care Services, Inc. for net cash proceeds of $124.7 million. This transaction resulted in a gain of $60.1 million that is included in gain on sale of facilities in discontinued operations.

The following table lists our owned real estate properties as of December 31, 2008:

Type	Number of States	Number of Facilities	Land		Buildings and Improvements		Total Real Estate Investment		Accumulated Depreciation		Notes and Bonds Payable
	(Dollar amounts in thousands)
Assisted and independent living facilities	35	251	$	159,674	$	1,565,091	$	1,724,765	$	223,085	$	193,535
Skilled nursing facilities	29	172		84,479		827,935		912,414		208,345		14,660
Continuing care retirement communities	8	10		8,612		116,196		124,808		24,006		—
Specialty hospitals	3	7		6,114		69,667		75,781		15,268		—
Medical office buildings—triple-net	7	19		24,646		98,625		123,271		2,666		30,301
Medical office buildings—multi-tenant	14	60		36,869		402,305		439,174		16,742		196,703
Total	43	519	$	320,394	$	3,079,819	$	3,400,213	$	490,112	$	435,199

No impairment charges were recorded during 2008 or 2007.

During 2006, we recognized impairment charges in assets held for sale of $0.1 million which related to two skilled nursing facilities written down to their estimated fair values less selling costs based on a review of the market prices for similar assets.

4. Mortgage Loans Receivable

During 2008, we funded one mortgage loan secured by one skilled nursing facility in the amount of $6.8 million and one mortgage loan secured by one medical office building in the amount of $47.5 million to a related party. We also funded an additional $0.8 million on existing mortgage loans.

During 2008, two mortgage loans secured by two assisted and independent living facilities totaling $8.9 million were repaid at maturity and one mortgage loan secured by two skilled nursing facilities was prepaid in the amount of $4.2 million.

During 2008, we acquired, out of bankruptcy, title to one skilled nursing facility securing a previously impaired mortgage loan with a net book value of $2.9 million which approximated our estimate of fair value of the facility and was allocated to land and building. Concurrent with acquiring title to the facility, we entered into a lease for this facility with a third party who was one of our existing tenants.

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December 31, 2008

During 2007, we funded two mortgage loans secured by four skilled nursing facilities and three assisted and independent living facilities we sold to the former tenants for a total of $32.9 million ($18.9 million net of a deferred gain of $14.0 million) and acquired four mortgage loans secured by six assisted and independent living facilities and four skilled nursing facilities totaling $19.1 million (including a premium of $0.4 million). One of the four mortgage loans acquired was prepaid in July 2007 in the amount of $4.7 million. In connection with the acquisition of the four mortgage loans, we acquired $27.7 million of loans secured by leasehold mortgages and other items which are included in the caption “Other assets” on our balance sheets. We also funded an additional $1.3 million on existing mortgage loans.

During 2007, one mortgage loan secured by one skilled nursing facility was prepaid in the amount of $8.3 million. Concurrent with the loan payoff, the unconsolidated joint venture we have with a state pension fund investor (see Note 6) acquired title to the facility from the former borrower and entered into a lease for this facility with the former borrower.

During 2007, we acquired title to one continuing care retirement community securing an impaired mortgage loan with a balance of $7.7 million which approximated our estimate of fair value of the facility and was allocated to land and building. In connection with acquiring title to the facility, we entered into a lease for this facility with the former borrower.

At December 31, 2007, we had an investment in one impaired loan with a balance of $2.9 million (net of a discount of $4.1 million). During 2007, the loan had an average balance of $2.9 million (net of an average discount of $4.1 million), and we recognized and received cash payments for interest income totaling $0.6 million. We foreclosed on this loan during 2008.

We recognize interest income on impaired loans to the extent our estimate of the fair value of the collateral is sufficient to support the balance of the loans, other receivables and all related accrued interest. Once the total of the loans, other receivables and all related accrued interest is equal to our estimate of the fair value of the collateral, we recognize interest income on a cash basis. We provide reserves against impaired loans to the extent our total investment exceeds our estimate of the fair value of the loan collateral.

At December 31, 2008, we held 15 mortgage loans receivable secured by 17 skilled nursing facilities, nine assisted and independent living facilities, one medical office building and one land parcel. In addition, we held one mortgage loan receivable secured by the skilled nursing portion of a continuing care retirement community that for facility count purposes is accounted for in the real estate properties above as a continuing care retirement community and therefore is not counted as a separate facility here. At December 31, 2008, the mortgage loans receivable had an aggregate principal balance of $179.2 million and are reflected in our consolidated balance sheets net of aggregate deferred gains and discounts totaling $19.3 million, with individual outstanding balances ranging from $0.7 million to $47.5 million and maturities ranging from 2009 to 2024. The principal balances of mortgage loans receivable as of December 31, 2008 mature as follows:

Year	Maturities		Year	Maturities
	(In thousands)			(In thousands)
2009	$	67,996	2012	$	715
2010		20,320	2013		16,163
2011		33,658	Thereafter		40,328

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December 31, 2008

The following table lists our mortgage loans receivable at December 31, 2008:

Location of Facilities	Number of Facilities	Interest Rate		Final Maturity Date	Estimated Balloon Payment(1)		Original Face Amount of Mortgages		Carrying Amount of Mortgages
	(Dollar amounts in thousands)
Skilled Nursing Facilities:
California	4	12.00	%	12/09	$	18,786	$	18,786	$	8,885
Florida	1	10.92	%	05/17		4,996		5,409		5,370
Florida	1	9.75	%	12/18		5,358		5,630		5,483
Illinois	1	9.00	%	01/24		—		9,500		7,549
Indiana	1	10.00	%	06/13		6,750		6,750		6,750
Kansas	2	11.58	%	01/09		1,148		1,148		631
Louisiana	1	10.89	%	04/15		2,454		3,850		3,252
Massachusetts	1	10.20	%	07/16		2,240		3,265		3,002
Michigan	4	12.38	%	06/10		4,882		4,887		4,941
Pennsylvania	1	10.61	%	06/17		9,903		9,903		9,903
Subtotals	17					56,517		69,128		55,766
Assisted and Independent Living Facilities:
Delaware	1	10.00	%	06/11		5,280		5,280		4,533
Florida	1	9.00	%	11/10		6,220		6,220		4,415
Louisiana	1	10.00	%	06/11		7,260		7,260		6,232
Massachusetts	1	9.52	%	06/23		8,500		8,500		8,500
Ohio	1	10.00	%	06/11		6,270		6,270		5,382
Tennessee	1	9.00	%	11/10		3,252		3,252		2,308
Tennessee	1	10.00	%	06/11		5,280		5,280		4,533
Virginia	1	9.00	%	11/10		4,665		4,665		3,311
Virginia	1	10.00	%	06/11		8,910		8,910		7,649
Subtotals	9					55,637		55,637		46,863
Continuing Care Retirement Community:
Florida	—	7.81	%	11/13		8,739		9,200		9,078
Subtotals	—					8,739		9,200		9,078
Medical Office Building:
California	1	6.55	%	03/09		47,500		47,500		47,500
Subtotals	1					47,500		47,500		47,500
Land Parcel:
Texas	—	9.00	%	09/10		692		692		692
Subtotals	—					692		692		692
Total	27				$	169,085	$	182,157	$	159,899

(1) Certain mortgage loans receivable require monthly principal and interest payments at level amounts over life to maturity. Certain mortgage loans require monthly interest only payments until maturity. Some mortgage loans receivable have interest rates which periodically adjust, but cannot decrease, which results in varying principal and interest payments over life to maturity, in which case the balloon payments

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December 31, 2008

reflected are an estimate. Most mortgage loans receivable require a prepayment penalty based on a percentage of principal outstanding or a penalty based upon a calculation maintaining the yield we would have earned if prepayment had not occurred.

The following table summarizes the changes in mortgage loans receivable during 2008 and 2007:

	2008			2007
	(In thousands)
Balance at January 1	$	121,694		$	106,929
New mortgage loans		54,250			51,596
Additional fundings on existing mortgage loans		780			1,288
Deferred gains		—			(14,005	)
Premiums		—			428
Amortization of premium		(111	)		(256	)
Collection of principal		(13,769	)		(16,622	)
Acquisition of title to facilities previously securing mortgage loans		(2,945	)		(7,664	)
Balance at December 31	$	159,899		$	121,694

5. Medical Office Building Joint Ventures

NHP/Broe, LLC

In December 2005, we entered into a joint venture with Broe called NHP/Broe, LLC (“Broe I”) to invest in multi-tenant medical office buildings. We hold a 90% equity interest in the venture and Broe holds a 10% equity interest. Broe is the managing member of Broe I, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies.

For the first 36 months of the Broe I joint venture, we will receive 100% of the cash distributions from the joint venture until we have received a specified return, at which point Broe will receive 100% of the cash distributions until it has received a specified return. If we have not received the specified return after the first 36 months, distributions will go to the members in accordance with their ownership percentages until such time as each member earns the specified return. When the specified return is achieved, Broe will receive an increasing percentage of the cash distributions from the joint venture.

At December 31, 2008, the Broe I joint venture owned 20 multi-tenant medical office buildings located in six states.

During 2008, the Broe I joint venture funded $1.7 million in capital improvements at certain facilities.

During 2008, the Broe I joint venture sold one multi-tenant medical office building for $0.4 million. The sale resulted in a gain of $0.1 million which is included in gain on sale of facilities in discontinued operations.

During 2008, cash distributions from the Broe I joint venture of $1.0 million were made to us. No cash distributions were made to Broe during 2008.

During 2007, the Broe I joint venture funded $0.9 million in capital improvements at certain facilities.

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December 31, 2008

During 2007, the Broe I joint venture sold two of five buildings within one medical office building campus for $0.9 million. The sale resulted in a gain of $0.4 million, of which $0.3 million ($0.1 million representing Broe’s share of the gain) is included in gain on sale of facilities in discontinued operations.

During 2007, cash distributions from the Broe I joint venture of $0.5 million and $0.1 million were made to us and to Broe, respectively.

All intercompany balances with the Broe I joint venture have been eliminated for purposes of our consolidated financial statements.

NHP/Broe II, LLC

In February 2007, we entered into a second joint venture with Broe called NHP/Broe II, LLC (“Broe II”) to invest in multi-tenant medical office buildings. We hold a 95% equity interest in the venture and Broe holds a 5% equity interest. Broe is the managing member of Broe II, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies.

Cash distributions from the Broe II joint venture are made in accordance with the members’ ownership interests until specified returns are achieved. As the specified returns are achieved, Broe will receive an increasing percentage of the cash distributions from the joint venture.

At December 31, 2008, the Broe II joint venture owned 16 multi-tenant medical office buildings located in four states.

During 2008, the Broe II joint venture funded $0.2 million in capital improvements at certain facilities.

During 2008, the Broe II joint venture placed $35.8 million of secured debt on a portion of its portfolio.

During 2008, cash distributions from the Broe II joint venture of $3.7 million and $0.2 million were made to us and to Broe, respectively.

During 2007, the Broe II joint venture acquired 16 multi-tenant medical office buildings located in four states. The purchase price totaled $94.0 million, of which $60.2 million was allocated to real estate with the remaining $33.8 million allocated to other assets and liabilities. The acquisitions were originally financed with a bridge loan from us of $5.7 million and capital contributions of $83.9 million and $4.4 million, from us and Broe, respectively. The bridge loan from us was replaced on August 1, 2007 by third party mortgage financing in the amount of $5.2 million (funding up to $5.9 million is available under the financing agreements). The Broe II joint venture subsequently placed an additional $4.0 million of mortgage financing on a portion of the portfolio resulting in cash distributions reducing net capital contributions to approximately $80.1 million and $4.2 million for us and Broe, respectively.

During 2007, the Broe II joint venture funded $0.4 million in capital improvements at certain facilities.

During 2007, cash distributions from the Broe II joint venture of $0.8 million and $44,000 were made to us and to Broe, respectively.

All intercompany balances with the Broe II joint venture have been eliminated for purposes of our consolidated financial statements.

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December 31, 2008

McShane/NHP JV, LLC

In December 2007, we entered into a joint venture with McShane called McShane/NHP JV, LLC (“McShane/NHP”) to invest in multi-tenant medical office buildings. We hold a 95% equity interest in the venture and McShane holds a 5% equity interest. McShane is the managing member of McShane/NHP, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies.

Cash distributions from the McShane/NHP joint venture are made in accordance with the members’ ownership interests until specified returns are achieved. As the specified returns are achieved, McShane will receive an increasing percentage of the cash distributions from the joint venture.

At December 31, 2008, the McShane/NHP joint venture owned seven multi-tenant medical office buildings located in one state.

During 2008, the McShane/NHP joint venture acquired the final multi-tenant medical office building of a seven building portfolio. The purchase price for the final building totaled $2.0 million, of which $1.8 million was allocated to real estate with the remaining $0.2 million allocated to other assets and liabilities. The other six multi-tenant medical office buildings were acquired in December 2007. The purchase price totaled $46.5 million, of which $42.6 million was allocated to real estate with the remaining $3.9 million allocated to other assets and liabilities. The total portfolio acquisition was originally financed with a bridge loan from us of $31.2 million and capital contributions of $16.0 million and $0.8 million from us and McShane, respectively.

During 2008, the McShane/NHP joint venture funded $0.2 million in capital improvements at certain facilities.

During 2008, cash distributions from the McShane/NHP joint venture of $0.9 million and $48,000 were made to us and to McShane, respectively. No cash distributions were made from the McShane/NHP joint venture during 2007.

All intercompany balances with the McShane/NHP joint venture have been eliminated for purposes of our consolidated financial statements.

NHP/PMB L.P.

In February 2008, we entered into an agreement with PMB and certain of its affiliates to acquire up to 18 medical office buildings, including six that are currently in development, for $747.6 million, including the assumption of approximately $282.6 million of mortgage financing. During 2008, NHP/PMB acquired PMB’s affiliates’ interests in nine of the 18 medical office buildings, including one property which is included in our triple-net leases segment and eight properties which are multi-tenant medical office buildings (one of which consisted of a 50% interest through a joint venture which is consolidated by NHP/PMB) for $232.2 million, including acquisition costs, which was paid in a combination of cash, the assumption of $120.8 million of mortgage financing and the issuance of 1,829,562 limited partnership units with a fair value at the date of issuance of $58.4 million. During 2008, we also acquired one of the 18 medical office buildings directly (not through NHP/PMB) for $14.7 million, including acquisition costs (see Note 3). Pursuant to the agreement with PMB, certain conditions must be met in order for us to be obligated to purchase the seven remaining medical office buildings. We recently elected to terminate the agreement with respect to one property after the conditions requiring us to close on such property were not met.

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December 31, 2008

Included in the cost of the acquisitions from PMB affiliates is $7.8 million of accrued acquisition costs at December 31, 2008. These accrued acquisition costs will be paid to PMB and its affiliates and are calculated based on the properties that have closed to date. If we acquire more buildings under this agreement, this amount would increase.

Under the terms of the agreement, a portion of the consideration for the multi-tenant medical office buildings is to be paid in the form of limited partnership units. After a one year holding period, units of NHP/PMB are exchangeable for cash or, at our option, shares of our common stock, initially on a one-for-one basis. Additionally, we entered into another agreement with PMB pursuant to which we currently have the right, but not the obligation, to acquire up to approximately $1 billion of multi-tenant medical office buildings developed by PMB through April 2016.

During 2008, cash distributions from NHP/PMB of $1.5 million were made to minority interest Class A unit holders. The net loss of the partnership totaling $1.2 million was allocated 100% to us. All intercompany balances with NHP/PMB have been eliminated for purposes of our consolidated financial statements.

6. Investment in Unconsolidated Joint Ventures

State Pension Fund Investor

In January 2007, we entered into a joint venture with a state pension fund investor. The purpose of the joint venture is to acquire and develop assisted living, independent living and skilled nursing facilities. We manage and own 25% of the joint venture, which will fund its investments with approximately 40% equity contributions and 60% debt. The original approved investment target was $475 million, but we exceeded that amount in 2007, and the total potential investment amount has been increased to $975 million. The financial statements of the joint venture are not consolidated in our financial statements as our joint venture partner has substantive participating rights, accordingly our investment is accounted for using the equity method.

At December 31, 2008, the joint venture owned 19 assisted and independent living facilities, 14 skilled nursing facilities and one continuing care retirement community located in nine states. During 2008, the joint venture placed $10.0 million of mortgage financing on one assisted and independent living facility resulting in cash distributions of $7.5 million and $2.5 million to our joint venture partner and us, respectively.

During 2008, the joint venture entered into an interest rate swap contract that is designated as hedging the variability of expected cash flows related to variable rate debt placed on a portion of its portfolio. The cash flow hedge has a fixed rate of 4.235%, a notional amount of $126.1 million and expires on January 1, 2015. The fair value of this contract at December 31, 2008 was $14.4 million which is included in accrued liabilities on the joint venture’s balance sheet.

During 2008, the joint venture exercised a purchase option of $21.8 million on one assisted and independent living facility and one skilled nursing facility which it previously had leasehold interests in. In connection with the purchase option exercise, the joint venture assumed $19.5 million of mortgage financing.

During 2007, the joint venture acquired 19 assisted and independent living facilities, 14 skilled nursing facilities and one continuing care retirement community located in nine states for approximately $531 million. The acquisitions were initially financed by the assumption of approximately $32 million of mortgage financing,

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December 31, 2008

approximately $182 million of new mortgage financing, capital contributions from our joint venture partner of approximately $238 million and capital contributions from us of approximately $79 million. The joint venture subsequently placed approximately $102 million of mortgage financing on portions of the portfolio resulting in cash distributions reducing net capital contributions to approximately $161 million and $54 million for our joint venture partner and us, respectively. Fourteen of the assisted and independent living facilities, four of the skilled nursing facilities and the continuing care retirement community, with a total cost of approximately $227 million, were acquired by the joint venture from us, and the related leases were transferred to the joint venture (see Note 3). In addition, the joint venture acquired title to one of the skilled nursing facilities, for which we previously provided a mortgage loan in the amount of $8.3 million, from the former borrower concurrently with the repayment of such loan to us by the former borrower (see Note 4).

Cash distributions from the joint venture are made in accordance with the members’ ownership interests until specified returns are achieved. As the specified returns are achieved, we will receive an increasing percentage of the cash distributions from the joint venture. In addition to our share of the income, we receive a management fee calculated as a percentage of the equity investment in the joint venture. This fee is included in our income from unconsolidated joint ventures and in the general and administrative expenses on the joint venture’s income statement. During 2008, we earned management fees of $3.9 million, and our share of the net income was $0.2 million. During 2007, we earned management fees of $1.5 million, and our share of the net income was $0.4 million.

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December 31, 2008

The unaudited condensed balance sheet and income statement for the joint venture below present its financial position as of December 31, 2008 and 2007 and its results of operations for the year then ended.

BALANCE SHEET

	2008			2007
	(in thousands)
ASSETS
Real estate properties:
Land	$	38,892		$	35,042
Building and improvements		525,214			496,188
		564,106			531,230
Less accumulated depreciation		(24,138	)		(6,811	)
		539,968			524,419
Cash and cash equivalents		3,216			3,689
Receivables		45			—
Other assets		5,964			2,825
	$	549,193		$	530,933
LIABILITIES AND EQUITY
Notes and bonds payable	$	343,842		$	316,935
Accounts payable and accrued liabilities		19,623			3,461
Equity:
Capital contributions		229,475			216,078
Distributions		(32,148	)		(7,302	)
Cumulative net income		2,760			1,761
Other comprehensive income		(14,359	)		—
Total equity		185,728			210,537
	$	549,193		$	530,933

INCOME STATEMENT

	2008		2007
	(in thousands)
Revenues:
Rental income	$	45,541	$	16,560
Interest and other income		101		110
		45,642		16,670
Expenses:
Interest and amortization of deferred financing costs		19,939		6,379
Depreciation and amortization		18,359		6,811
General and administrative		6,345		1,719
		44,643		14,909
Net income	$	999	$	1,761

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December 31, 2008

PMB Real Estate Services LLC

In February 2008, we entered into an agreement with PMB to acquire a 50% interest in PMBRES, a full service property management company. PMB is the managing member of PMBRES. The transaction closed on April 1, 2008. In consideration for the 50% interest, we paid $1 million at closing, and we will make additional payments on or before March 31, 2010 and 2011 equal to six times the normalized net operating profit of PMBRES for 2009 and 2010, respectively (in each case, less the amount of all prior payments). PMBRES provides property and asset management services for the multi-tenant medical office buildings acquired in the PMB transaction, and receives an annual asset management fee of 0.65% of revenues, an annual property management fee of 4.0% of revenues and standard leasing and construction management fees. During 2008, our share of the net loss was $0.3 million.

PMB SB 399-401 East Highland LLC

In August 2008, we acquired from an entity affiliated with PMB, a 44.95% interest in an entity that owns two multi-tenant medical office buildings for $3.5 million. During 2008, our share of the net loss was $14,000.

7. Assets Held for Sale

During 2008, we transferred 24 assisted and independent living facilities and one skilled nursing facility to assets held for sale.

On April 2, 2008, 23 of the 24 assisted and independent living facilities were sold to Emeritus Corporation (“Emeritus”), the tenant of the facilities, for a gross purchase price of $305.0 million. In connection with the sale, we retired $55.8 million of secured debt and provided Emeritus with a loan in the amount of $30.0 million (included in the caption “Other assets” on our balance sheets) at a rate of 7.25% per annum for a term of not more than four years. The sale resulted in a gain of $135.0 million which is included in gain on sale of facilities in discontinued operations.

The skilled nursing facility was sold in July 2008 for net cash proceeds of $4.9 million. The sale resulted in a gain of $2.3 million which is included in gain on sale of facilities in discontinued operations.

During 2007, we sold six assets held for sale for a total of $18.8 million, and provided a mortgage loan for the same amount secured by four of the assets, partially offset by a deferred gain of $9.9 million that will be recognized in proportion to principal payments received. We also sold one land parcel for $0.5 million and 23 bed licenses for net cash proceeds of $0.3 million, resulting in gains of $0.1 million and $0.1 million, respectively, which are included in gain on sale of facilities in discontinued operations.

At December 31, 2008, one assisted living facility was classified as an asset held for sale and this facility was sold on January 31, 2009.

8. Intangible Assets

Intangible assets include items such as lease-up intangible assets, above market tenant and ground lease intangible assets and in-place lease intangible assets. At December 31, 2008 and 2007, the gross balance of intangible assets was $130.1 million and $66.3 million, respectively. At December 31, 2008 and 2007, the accumulated amortization of intangible assets was $20.7 million and $7.8 million, respectively. For the years ended December 31, 2008, 2007 and 2006, operating rent includes $0.1 million, $0.1 million and ($0.2) million from the amortization of above/below market lease intangible assets, respectively. For the years ended

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December 31, 2008

December 31, 2008, 2007 and 2006, expenses include $11.9 million, $4.8 million and $3.2 million from the amortization of other intangible assets and liabilities, respectively. Additionally, at December 31, 2008, we had $23.9 million of gross intangible liabilities recorded under the caption “Accounts payable and accrued liabilities” on our balance sheets. At December 31, 2008, the accumulated amortization of intangible liabilities was $2.1 million. As of December 31, 2008, the weighted average amortization period of intangible assets and liabilities was approximately 18 and 24 years, respectively.

The future estimated aggregate amortization related to intangible assets and liabilities is as follows:

Year	Intangible Assets		Intangible Liabilities		Net Intangible Amortization
	(In thousands)
2009	$	16,096	$	2,316	$	13,780
2010		12,401		2,071		10,330
2011		9,697		1,709		7,988
2012		8,013		1,580		6,433
2013		6,812		1,511		5,301
Thereafter		56,415		12,610		43,805

9. Other Assets

At December 31, 2008 and 2007, other assets consisted of:

	2008		2007
	(In thousands)
Other receivables, net of reserves of $5.0 million and $4.6 million at December 31, 2008 and 2007, respectively	$	64,998	$	34,379
Straight-line rent receivables, net of reserves of $90.7 million and $79.4 million at December 31, 2008 and 2007, respectively		21,224		10,727
Deferred financing costs		15,377		17,927
Capitalized lease and loan origination costs		2,631		2,307
Investments and restricted funds		13,257		18,024
Prepaid ground leases		10,241		10,431
Other		3,806		7,420
	$	131,534	$	101,215

Investments are recorded at fair value using quoted market prices.

10. Credit Facility

We have a $700 million revolving senior unsecured credit facility maturing on December 15, 2010. The maturity date may be extended by one additional year at our discretion. At our option, borrowings under the Credit Facility bear interest at the prime rate (3.25% at December 31, 2008) or applicable LIBOR plus 0.85% (1.29% at December 31, 2008). We pay a facility fee of 0.15% per annum on the total commitment under the agreement. At December 31, 2008, we had no balance outstanding on our Credit Facility.

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December 31, 2008

Our Credit Facility requires us to maintain, among other things, the financial covenants detailed below. As of December 31, 2008, we were in compliance with all of these covenants:

Covenant	Requirement			Actual
	(Dollar amounts in thousands)
Minimum net asset value	$	820,000		$	2,565,715
Maximum total indebtedness to capitalization value		60	%		38	%
Minimum fixed charge coverage ratio		1.75			2.83
Maximum secured indebtedness ratio		30	%		13	%
Maximum unencumbered asset value ratio		60	%		30	%

Our Credit Facility allows us to exceed the 60% requirements, up to a maximum of 65%, on the maximum total indebtedness to capitalization value and maximum unencumbered asset value ratio for up to two consecutive fiscal quarters.

11. Senior Notes

During 2008, we repaid $60.5 million of fixed rate notes with a weighted average rate of 7.17% at maturity and prepaid $49.7 million of fixed rate notes with a weighted average rate of 7.15%. The prepayments resulted in a net gain totaling $4.6 million which is reflected as gain on debt extinguishment, net on our statements of operations.

On October 19, 2007, we issued $300 million of notes due February 1, 2013 at a fixed rate of 6.25% resulting in net proceeds of approximately $297 million. In August and September 2007, we entered into four six-month Treasury lock agreements totaling $250 million at a weighted average rate of 4.212% in order to hedge the expected interest payments associated with a portion of these notes. The Treasury lock agreements were settled in cash on October 17, 2007 for the present value of the difference between the locked Treasury rates and the unwind rate (equal to the then-prevailing Treasury rate less the forward premium or 4.364%). The prevailing Treasury rate exceeded the rates in the Treasury lock agreements, thus the counterparties to those agreements made payments to us of $1.6 million which was recorded as other comprehensive income. The settlement amounts are being amortized over the life of the debt as a yield reduction.

During 2007, we repaid $17.0 million of fixed rate notes with a weighted average rate of 7.31% at maturity and prepaid $4.0 million of fixed rate notes with a rate of 8.25%.

The aggregate principal amount of notes outstanding at December 31, 2008 was $1.1 billion. At December 31, 2008, the weighted average interest rate on the notes was 6.5% and the weighted average maturity was 5.8 years. The principal balances of the notes as of December 31, 2008 mature as follows:

Year	Maturities		Year	Maturities
	(In thousands)			(In thousands)
2009	$	32,000	2012	$	72,950
2010		—	2013		299,850
2011		339,040	Thereafter		312,393	(1)

(1) There are $55.0 million of notes due in 2037 which may be put back to us at their face amount at the option of the holder on October 1st of any of the following years: 2009, 2012, 2017, or 2027. There are $23.0 million of notes due in 2038 which may be put back to us at their face amount at the option of the holder on July 7th of any of the following years: 2013, 2018, 2023, or 2028.

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December 31, 2008

12. Notes and Bonds Payable

The aggregate principal amount of notes and bonds payable at December 31, 2008 was $435.2 million. Notes and bonds payable are due through the year 2037, at interest rates ranging from 2.7% to 8.8% and are secured by real estate properties with an aggregate net book value as of December 31, 2008 of $719.2 million. At December 31, 2008, the weighted average interest rate on the notes and bonds payable was 6.0% and the weighted average maturity was 7.9 years.

During 2008, we assumed mortgages as part of various acquisitions totaling $120.8 million and, through our Broe II joint venture, placed $35.8 million of secured debt on a portion of its portfolio (see Note 5). In connection with the sale of 23 assisted and independent living facilities to Emeritus, the tenant of the facilities, we prepaid $55.8 million of fixed rate secured debt that bore interest at a weighted average rate of 7.04% (see Note 3).

During 2007, we assumed mortgages as part of various acquisitions totaling $55.7 million. We repaid $0.6 million of secured debt at maturity. We transferred one mortgage with a balance of $4.7 million at a rate of 5.3% in connection with the sale of the related facility to the tenant of the facility pursuant to a purchase option. We prepaid three additional mortgages with a combined balance of $25.4 million with interest rates ranging from 6.7% to 6.9%. In addition, six mortgages with a combined balance of $32.6 million with interest rates ranging from 5.5% to 9.6% were assumed by the unconsolidated joint venture we have with a state pension fund investor in connection with our sale of the related facilities to the unconsolidated joint venture (see Note 6).

The principal balances of the notes and bonds payable as of December 31, 2008 mature as follows:

Year	Maturities		Year	Maturities
	(In thousands)			(In thousands)
2009	$	39,071	2012	$	46,007
2010		71,263	2013		40,406
2011		33,096	Thereafter		205,356

13. Preferred Stock

Series A Cumulative Preferred Step-Up REIT Securities

During 1997, we sold 1,000,000 shares of 7.677% Series A Cumulative Preferred Step-Up REIT Securities (“Series A Preferred Stock”) with a liquidation preference of $100 per share. Dividends on the Series A Preferred Stock are cumulative from the date of original issue and are payable quarterly in arrears, commencing December 31, 1997 at the rate of 7.677% per annum of the liquidation preference per share (equivalent to $7.677 per annum per share) through September 30, 2012 and at a rate of 9.677% of the liquidation preference per annum per share (equivalent to $9.677 per annum per share) thereafter. The Preferred Stock was not redeemable prior to September 30, 2007. On or after September 30, 2007, the Preferred Stock could be redeemed for cash at our option, in whole or in part, at a redemption price of $100 per share, plus accrued and unpaid dividends, if any, thereon.

During August 2005, we repurchased 99,515 shares of our Series A Preferred Stock, and on October 1, 2007, we redeemed the 900,485 remaining outstanding shares of our Series A Preferred Stock at a redemption price of $100 per share. Concurrent with the redemption, we paid the final dividend on the Series A Preferred Stock.

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December 31, 2008

Series B Cumulative Convertible Preferred Stock

During 2004, we issued 1,064,500 shares of 7.75% Series B Cumulative Convertible Preferred Stock (“Series B Preferred Stock”) with a liquidation preference of $100 per share. Dividends on the Series B Preferred Stock are cumulative from the date of original issue and are payable quarterly in arrears, commencing September 30, 2004.

Except as required by Maryland law and our amended and restated articles of incorporation, the holders of the Series B Preferred Stock will have no voting rights unless dividends payable on the Series B Preferred Stock are in arrears for six or more quarterly periods (whether or not consecutive). In that event, the holders of the Series B Preferred Stock, voting as a single class with any other preference securities having similar voting rights, will be entitled at the next regular or special meeting of our stockholders to elect two directors and the number of directors that comprise our board will be increased by the number of directors so elected. These voting rights and the terms of the directors so elected will continue until such time as the dividend arrearage on the Series B Preferred Stock has been paid in full.

There were 749,184 and 1,064,450 shares of Series B Preferred Stock outstanding at December 31, 2008 and 2007, respectively. Each share of Series B Preferred Stock was initially convertible into 4.3975 shares of our common stock at the option of the holder (equivalent to a conversion price of $22.74 per share). At December 31, 2008, each share of Series B Preferred Stock was convertible into 4.4709 shares of our common stock (equivalent to a conversion price of $22.37 per share). At December 31, 2008, if all of the Series B Preferred Stock were to convert, it would result in the issuance of approximately 3,350,000 common shares. The Series B Preferred Stock is convertible upon the occurrence of any of the following events:

• Our common stock reaching a price equal to 125% of the conversion price (initially $28.43 per share, $27.96 at December 31, 2008) for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding calendar quarter;

• The price per share of the Series B Preferred Stock falls below 98% of the product of the Conversion Rate and the average closing sale prices of our common stock for five consecutive trading days;

• The credit ratings from Moody’s Investors Service or Standard & Poor’s Ratings Services fall more than two levels below the initial ratings of Ba1 and BB+, respectively;

• We are a party to a consolidation, merger, binding share exchange or sale of all or substantially all of our assets where our common stock would be converted into cash, securities or other property, or if a fundamental change occurs, as defined, a holder may convert the holder’s shares of Series B Preferred Stock into common stock or the cash, securities or other property that the holder would have received if the holder had converted the holders’ Series B Preferred Stock prior to the transaction or fundamental change; or

• The Series B Preferred Stock is called for redemption by us.

The Series B Preferred Stock was convertible from January 1, 2007 to September 30, 2007, and during that time, 50 shares were converted into 220 shares of common stock at a conversion price of $22.66 per share (equivalent to 4.4136 shares of common stock per share of Series B Preferred Stock). The Series B Preferred Stock was convertible from January 1, 2008 to December 31, 2008, and during that time, approximately 315,000 shares were converted into approximately 1,406,000 shares of common stock at a weighted average conversion price of $22.43 per share (equivalent to 4.4589 shares of common stock per share of Series B Preferred Stock). For at least 20 of the last 30 trading days of 2008, our common stock did not reach a price greater than or equal to

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December 31, 2008

125% of the $22.37 conversion price at December 31, 2008. As such, the Series B Preferred Stock will not be convertible from January 1, 2009 through March 31, 2009 at which time the same test will be performed to determine whether the Series B Preferred Stock will become convertible.

We may redeem the Series B Preferred Stock after five years at the redemption price per share plus any accumulated and unpaid dividends. The redemption prices are as follows:

Redemption on or after	Price per Share
July 5, 2009	$	103.875
July 1, 2010	$	103.100
July 1, 2011	$	102.325
July 1, 2012	$	101.550
July 1, 2013	$	100.775
July 1, 2014	$	100.000

The conversion rate will be adjusted if:

• We issue common stock as a dividend or distribution on shares of our common stock;

• We effect a common stock share split or combination;

• We issue rights, warrants, options or other securities to the holders of our common stock at a price less than the closing common stock price on the previous business day;

• We distribute our stock, evidence of our indebtedness or other assets or property, excluding cash dividends or spin-offs;

• We increase the effective dividend rate on our common stock; or

• We make a tender offer or exchange offer for our common stock at a price higher than the closing price on the previous business day.

14. Common Stock

We enter into sales agreements from time to time with Cantor Fitzgerald & Co. to sell shares of our common stock from time to time through a controlled equity offering program. During the fourth quarter of 2008, we sold 2,381,000 shares of common stock at a weighted average price of $29.29, resulting in net proceeds of $69.0 million after sales fees. During 2008, we sold 4,955,000 shares of common stock at a weighted average price of $32.24, resulting in net proceeds of $158.1 million after sales fees. During 2007, we sold approximately 7,808,000 shares of common stock at a weighted average price of $31.52, resulting in net proceeds of $242.9 million after sales fees. On January 9, 2009, we entered into a new sales agreement with Cantor Fitzgerald & Co. to sell up to 5,000,000 shares of our common stock from time to time.

We sponsor a dividend reinvestment and stock purchase plan that enables existing stockholders to purchase additional shares of common stock by automatically reinvesting all or part of the cash dividends paid on their shares of common stock. The plan also allows investors to acquire shares of our common stock, subject to certain limitations, including a maximum monthly investment of $10,000, at a discount ranging from 0% to 5%, determined by us from time to time in accordance with the plan. The discount during 2008 and 2007 was 2%. During 2008, we issued approximately 789,000 shares of common stock, at an average price of $28.43, resulting in net proceeds of approximately $22.4 million. During 2007, we issued approximately 724,000 shares of common stock, at an average price of $30.20, resulting in net proceeds of approximately $21.8 million.

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December 31, 2008

15. Stock Incentive Plan

Under the terms of a stock incentive plan (the “Plan”), we reserved for issuance 3,000,000 shares of common stock. At December 31, 2008, approximately 1,623,000 shares of common stock remain available for issuance under the plan. Under the Plan, as amended, we may issue stock options, restricted stock, dividend equivalents and stock appreciation rights.

Summaries of the status of stock options granted to officers, restricted stock granted to directors and restricted stock, restricted stock units, performance shares and stock appreciation rights granted to employees at December 31, 2008, 2007 and 2006 and changes during the years then ended are as follow:

	2008					2007					2006
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
	(Dollar amounts in thousands except per share amounts)
Officer Stock Options:
Outstanding at beginning of year		569,749		$	18.80		592,427		$	18.86		687,307		$	19.07
Granted		—			—		—			—		—			—
Exercised		(181,777	)		20.91		(22,678	)		20.51		(84,880	)		19.73
Forfeited		—			—		—			—		(10,000	)		25.75
Expired		—			—		—			—		—			—
Outstanding at end of year		387,972			17.82		569,749			18.80		592,427			18.86
Exercisable at end of year		387,972			17.82		569,749			18.80		592,427			18.86
Intrinsic value of options outstanding	$	6,666
Intrinsic value of options exercisable	$	6,666
Intrinsic value of options exercised	$	2,472				$	274				$	427
Director Restricted Stock and Restricted Stock Units:
Outstanding at beginning of year		49,000		$	25.39		47,000		$	22.11		38,000		$	19.19
Awarded		21,000			33.28		21,000			33.63		21,000			22.87
Vested		(28,000	)		24.96		(19,000	)		21.88		(12,000	)		14.20
Forfeited		—			—		—			—		—			—
Outstanding at end of year		42,000		$	29.63		49,000		$	25.39		47,000		$	22.11
Fair value of shares vested	$	699				$	416				$	170
Employee Restricted Stock:
Outstanding at beginning of year		64,610		$	23.43		97,675		$	22.38		61,094		$	21.70
Awarded		34,917			34.36		6,282			32.46		57,553			22.87
Vested		(42,996	)		23.37		(39,347	)		22.26		(20,365	)		21.70
Forfeited		(4,494	)		26.00		—			—		(607	)		22.87
Outstanding at end of year		52,037		$	30.59		64,610		$	23.43		97,675		$	22.38
Fair value of shares vested	$	1,005				$	876				$	442
Employee Restricted Stock Units:
Outstanding at beginning of year		288,542		$	28.49		406,182		$	28.60		—		$	—
Awarded		20,357			36.60		66,075			32.54		403,728			28.60
Dividend equivalents		51,167			29.47		39,797			30.47		2,454			28.97
Vested		(37,577	)		33.13		(223,512	)		30.24		—			—
Forfeited		(9,482	)		33.05		—			—		—			—
Outstanding at end of year		313,007		$	28.65		288,542		$	28.49		406,182		$	28.60
Fair value of units vested	$	1,121				$	6,403				$	—

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December 31, 2008

	2008				2007			2006
	Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
	(Dollar amounts in thousands except per share amounts)
Employee Performance Shares:
Outstanding at beginning of year	78,300		$	30.95	—	$	—	—	$	—
Awarded	175,002			21.28	78,300		30.95	—		—
Forfeited	(25,300	)		24.26	—		—	—		—
Outstanding at end of year	228,002		$	24.27	78,300	$	30.95	—	$	—
Employee Stock Appreciation Rights:
Outstanding at beginning of year	268,000		$	7.44	—	$	—	—	$	—
Awarded	329,434			6.54	268,000		7.44	—		—
Vested(1)	(9,033	)		7.47	—		—	—		—
Forfeited	(50,367	)		6.85	—		—	—		—
Outstanding at end of year	538,034		$	6.92	268,000	$	7.44	—	$	—

(1) Some SARs were vested and settled in 2008. At the time of settlement, the market price of the stock was below the exercise price of the SAR.

Stock options granted under the Plan became exercisable each year following the date of grant in annual increments of one-third and are exercisable at the market price of our common stock on the date of grant.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2008:

Options Outstanding							Options Exercisable
Exercise Prices			Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Number of Shares	Weighted Average Exercise Price
Low	High
$14.20	$	16.23	169,155	$	14.52	3.6 years	169,155	$	14.52
$18.48	$	20.56	121,467	$	19.63	3.6 years	121,467	$	19.63
$21.29	$	26.19	97,350	$	21.29	7.0 years	97,350	$	21.29

We received $3.2 million, $0.5 million and $1.7 million for stock option exercises in 2008, 2007 and 2006, respectively. Stock option amortization expense was $0.2 million in 2006. All stock options granted were fully vested as of December 31, 2006.

The director restricted stock awards are made to non-employee directors and granted at no cost. Director restricted stock awards historically vested at the third anniversary of the award date or upon the date they vacate their position. However, beginning in 2006, they vest in increments of one third per year for three years and will not fully vest if they vacate their position.

In 2006 and 2007, certain employees received annual awards of restricted stock or restricted stock units with dividend equivalents that are reinvested for each of 2006 and 2007. These grants generally vest in increments of one third per year for three years are accompanied by awards of dividend equivalents credited in the form of stock units. In December 2006, certain employees received a three-year grant of restricted stock units related to performance from January 1, 2004 to December 31, 2006. This three-year grant vested one year after the date of grant.

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December 31, 2008

Starting in 2007, performance shares and stock appreciation rights were granted as long-term incentive compensation awards for the officers and certain employees in place of restricted stock or restricted stock units. The performance share grants generally have a three year vesting period. The stock appreciation right grants vest in increments of one third per year for three years and have dividend equivalent rights credited in the form of stock units.

In addition, on August 15, 2006, the President and Chief Executive Officer received a grant of approximately 120,968 restricted stock units. This grant vests with respect to 50% of the units on the fifth anniversary of the date of grant and with respect to 10% of the units each year thereafter. On April 23, 2007, the Senior Vice President and Chief Investment Officer received a grant of approximately 30,807 restricted stock units. This grant vests with respect to 50% of the units on January 23, 2014, with the remaining 50% of the units vesting in seven substantially equal annual installments on each subsequent anniversary of such date. On April 23, 2007, the Senior Vice President and Chief Financial and Portfolio Officer received a grant of approximately 30,807 restricted stock units. This grant vests with respect to 50% of the units on July 23, 2012, with respect to an additional 20% of the units on each of January 23, 2013 and January 23, 2014 and with respect to the final 10% of the units on January 23, 2015. The restricted stock units earn dividend equivalents which are reinvested.

Compensation expense related to awards of restricted stock, restricted stock units, performance shares and stock appreciation rights are measured at fair value on the date of grant and amortized over the relevant service period. Compensation expense related to director restricted stock awards was $0.6 million in 2008, $0.4 million in 2007 and $0.1 million in 2006. Compensation expense related to employee restricted stock, restricted stock units, performance shares and stock appreciation rights awards was $5.2 million in 2008, $4.3 million in 2007 and $1.6 million in 2006. We expect to expense $10.6 million related to director and employee restricted stock, and employee restricted stock units, performance shares and stock appreciation rights over the remainder of the respective one to ten year service periods.

Awards of dividend equivalents accompany the stock option grants beginning in 1996 on a one-for-one basis. Such dividend equivalents are payable in cash until such time as the corresponding stock option is exercised, based upon a formula approved by the Compensation Committee of the board of directors. No dividend equivalents were paid prior to full vesting of the stock options. In addition, dividend equivalents are paid on restricted stock and restricted stock units prior to vesting. SFAS No. 123R provides that payments related to the dividend equivalents are treated as dividends. If an employee were to leave before all restricted stock or restricted stock units had vested, any dividend equivalents previously paid on the unvested shares or units would be expensed.

16. Earnings Per Share (EPS)

Basic EPS is computed by dividing income from continuing operations available to common stockholders by the weighted average common shares outstanding. Income from continuing operations available to common stockholders is calculated by deducting dividends declared on preferred stock from income from continuing operations.

Diluted EPS includes the effect of any potential shares outstanding, which for us is comprised of dilutive stock options, other share-settled compensation plans, forward equity shares (from the date we entered into the forward contract to the settlement date), and, if the effect is dilutive, Series B convertible preferred stock and/or limited partnership units in NHP/PMB. The dilutive effect of stock options, other share-settled compensation plans and forward equity shares is calculated using the treasury method with an offset from expected proceeds upon exercise of

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December 31, 2008

the stock options, unrecognized compensation expense and settlement of the forward equity agreements. There were no stock options with option prices that would not be dilutive for any period presented. The calculation below excludes 297,000 and 268,000 stock appreciation rights with prices that would not be dilutive in 2008 and 2007, respectively. No stock appreciation rights were granted prior to 2007. The Series B convertible preferred stock is not dilutive for any period presented. The limited partnership units in NHP/PMB were issued in 2008. In accordance with the terms of the partnership agreement, the entire loss incurred by the partnership in 2008 was allocated to us, thus, no minority interest income or expense related to the partnership was recognized during 2008. The table below details the components of the basic and diluted EPS from continuing operations available to common stockholders calculations:

	Years Ended December 31,
	2008				2007				2006
	Income			Shares	Income			Shares	Income			Shares
	(Amounts in thousands)
Income from continuing operations	$	108,140			$	132,633			$	52,634
Less: Preferred stock dividends		(7,637	)			(13,434	)			(15,163	)
Amounts used to calculate Basic EPS		100,503		97,246		119,199		90,625		37,471		77,489
Effect of dilutive securities:
Stock options		—		188		—		215		—		138
Other share-settled compensation plans		—		339		—		289		—		215
Limited partnership units		—		1,082		—		—		—		—
Forward equity shares		—		—		—		—		—		37
Amounts used to calculate Diluted EPS	$	100,503		98,855	$	119,199		91,129	$	37,471		77,879

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December 31, 2008

17. Pension Plan

During 1991, we adopted an unfunded defined benefit pension plan covering the non-employee members of our board of directors. The benefits, limited to the number of years of service on the board of directors, are based upon the then current annual retainer in effect. This plan was frozen effective December 31, 2005, and no future benefits will be earned under the plan. All benefits previously earned will be paid in accordance with the plan. Freezing the plan resulted in a one-time curtailment charge of $0.2 million that was included in expense in 2005.

The following tables set forth the amounts recognized in our financial statements:

	2008			2007
	(In thousands)
Change in projected benefit obligations:
Benefit obligation at beginning of year	$	1,460		$	1,503
Service cost		—			—
Interest cost		90			84
Amendments		—			—
Actuarial loss (gain)		204			(52	)
Benefits paid		(54	)		(75	)
Benefit obligation at end of year		1,700			1,460
Change in plan assets:
Fair value of plan assets at beginning of year	$	—		$	—
Employer contributions		54			75
Benefits paid		(54	)		(75	)
Fair value of plan assets at end of year		—			—
Funded status at end of year	$	(1,700	)	$	(1,460	)
Amounts recognized in the statement of financial position consist of:
Noncurrent assets	$	—		$	—
Current liabilities		60			50
Noncurrent liabilities		1,640			1,410
Total	$	1,700		$	1,460
Amounts recognized in accumulated other comprehensive income consist of:
Net loss (gain)	$	28		$	(182	)
Components of net periodic benefit cost and other amounts recognized in other comprehensive income:
Net periodic benefit cost:
Service cost	$	—		$	—
Interest cost		90			84
Amortization of prior service cost		—			—
Amortization of net gain		(6	)		—
Curtailment		—			—
Net periodic benefit cost		84			84
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net loss (gain)		204			(52	)
Amortization of net loss included in net periodic benefit cost		6			—
Total recognized in net periodic benefit cost and other comprehensive income	$	294		$	32

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December 31, 2008

The accumulated benefit obligation was $1.6 million at December 31, 2008.

We expect to recognize no net gain or loss and no prior service cost in accumulated other comprehensive income as components of net periodic benefit cost during 2009.

Estimated Benefit Payments:

Year	Estimated Payment		Year	Estimated Payment
	(In thousands)			(In thousands)
2009	$	60	2012	$	149
2010		110	2013		165
2011		150	2014-2018		688

Discount rates of 6.50% and 6.25% in 2008 and 2007, respectively, and a 5.0% increase in the annual retainer every other year were used in the calculation of the amounts above.

The estimated contribution for 2009 is $60,000.

18. Transactions with Significant Lessees

As of December 31, 2008, 96 triple-net leased facilities are leased to and operated by subsidiaries of Brookdale. Revenues from Brookdale were $54.9 million, $54.6 million and $47.3 million for the years ended December 31, 2008, 2007 and 2006, respectively. At December 31, 2008, Brookdale accounted for 15.2% of our revenues.

As of December 31, 2008, 32 triple-net leased facilities are leased to and operated by Hearthstone. Revenues from Hearthstone were $37.3 million, $37.7 million and $21.7 million for the years ended December 31, 2008, 2007 and 2006, respectively. At December 31, 2008, Hearthstone accounted for 10.6% of our revenues.

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December 31, 2008

19. Discontinued Operations

SFAS No. 144 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale and in which we have no continuing interest be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. If we have a continuing involvement, as in the sales to our unconsolidated joint venture, the operating results remain in continuing operations. See Note 3 and Note 7 for more detail regarding the facilities sold and classified as held for sale during 2008 and 2007. The following table details the operating results reclassified to discontinued operations for the periods presented:

	Years ended December 31,
	2008		2007		2006
	(In thousands)
Rental income	$	7,660	$	33,728	$	55,503
Interest and other income		5		29		152
		7,665		33,757		55,655
Interest and amortization of deferred financing costs		1,004		4,340		4,438
Depreciation and amortization		1,634		9,607		14,881
General and administrative		8		28		81
Medical office building operating expenses		16		26		20
Impairment of assets		—		—		83
		2,662		14,001		19,503
Income from discontinued operations		5,003		19,756		36,152
Gain on sale of facilities, net		154,995		72,069		96,791
Discontinued operations	$	159,998	$	91,825	$	132,943

20. Derivatives

During August and September 2007, we entered into four six-month Treasury lock agreements totaling $250 million at a weighted average rate of 4.212%. We entered into these Treasury lock agreements in order to hedge the expected interest payments associated with a portion of our October 19, 2007 issuance of $300 million of notes (see Note 11).

These Treasury lock agreements were settled in cash on October 17, 2007 for an amount equal to the present value of the difference between the locked Treasury rates and the unwind rate (equal to the then-prevailing Treasury rate less the forward premium or 4.364%). We reassessed the effectiveness of these agreements at the settlement date and determined that they were highly effective cash flow hedges under SFAS No. 133 for $250 million of the $300 million of notes as intended. The prevailing Treasury rate exceeded the rates in the Treasury lock agreements and, as a result, the counterparties to those agreements made payments to us of $1.6 million, which was recorded as other comprehensive income. The settlement amounts are being amortized over the life of the debt as a yield reduction.

In June 2006, we entered into two $125 million, two-month Treasury lock agreements in order to hedge the expected interest payments associated with a portion of our July 2006 issuance of $350 million of notes.

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December 31, 2008

These Treasury lock agreements were settled in cash on July 11, 2006, concurrent with the pricing of the $350 million of notes, for an amount equal to the present value of the difference between the locked Treasury rates and the unwind rate. We reassessed the effectiveness of these agreements at the settlement date and determined that they were highly effective cash flow hedges under SFAS No. 133 for $250 million of the $350 million of notes as intended. The prevailing Treasury rate exceeded the rates in the Treasury lock agreements and, as a result, the counterparty to those agreements made payments to us of $1.2 million, which was recorded as other comprehensive income. The settlement amounts are being amortized over the life of the debt as a yield reduction.

21. Comprehensive Income

We recorded the August and September 2007 Treasury lock agreements on our balance sheets at their estimated fair value of $0.1 million at September 30, 2007. In connection with the settlement of the August and September 2007 Treasury lock agreements on October 17, 2007, we recognized a gain of $1.6 million. The gain was recognized through other comprehensive income and is being amortized over the life of the related $300 million of notes as a yield reduction. During 2008 and 2007, we recorded $0.3 million and $0.1 million of amortization, respectively, and expect to record $0.3 million of amortization during 2009.

We recorded the June 2006 Treasury lock agreements on our balance sheets at their estimated fair value of $1.6 million at June 30, 2006. In connection with the settlement of the June 2006 Treasury lock agreements on July 11, 2006, we recognized a gain of $1.2 million. The gain was recognized through other comprehensive income and is being amortized over the life of the related $350 million of notes as a yield reduction. During 2008 and 2007, we recorded $0.3 million and $0.2 million of amortization, respectively, and expect to record $0.2 million of amortization during 2009.

SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R) (“SFAS No. 158”) requires changes in the funded status of a defined benefit pension plan to be recognized through comprehensive income in the year in which they occur. During 2008, we recognized other comprehensive loss of $0.2 million, and during 2007, we recognized other comprehensive income of $0.1 million, related to the change in the funded status of our defined benefit pension plan.

The following table sets forth the computation of comprehensive income for the periods presented:

	Year ended December 31,
	2008			2007
	(In thousands)
Net income	$	268,138		$	224,458
Other comprehensive income:
Gain on Treasury lock agreements		—			1,557
Amortization of gain on Treasury lock agreements		(511	)		(279	)
Defined benefit pension plan net actuarial gain (loss)		(204	)		52
		(715	)		1,330
Total comprehensive income	$	267,423		$	225,788

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December 31, 2008

22. Income Taxes

In June 2006, the FASB issued Interpretation No. 48 Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (FIN No. 48). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109 Accounting for Income Taxes and prescribes a recognition threshold and measurement attribute of tax positions taken or expected to be taken on a tax return.

We adopted the provisions of FIN No. 48 on January 1, 2007. No amounts were recorded for unrecognized tax benefits or related interest expense and penalties as a result of the implementation of FIN No. 48. The taxable periods ending December 31, 2005 through December 31, 2008 remain open to examination by the Internal Revenue Service and the tax authorities of the significant jurisdictions in which we do business.

Hearthstone Acquisition

On June 1, 2006, we acquired the stock of Hearthstone Assisted Living, Inc. (“HAL”), causing HAL to become a qualified REIT subsidiary. As a result of the acquisition, we succeeded to HAL’s tax attributes, including HAL’s tax basis in its net assets. Prior to the acquisition, HAL was a corporation subject to federal and state income taxes. In connection with the acquisition of HAL, NHP acquired approximately $82.5 million of federal net operating losses (“NOLs”) whose use is subject to annual limitations imposed by IRC Section 382. While we believe that these NOLs are accurate, any adjustments to HALs tax returns for periods prior to June 1, 2006 by the Internal Revenue Service could change the amount of the NOLs that we can utilize. We have used a portion of this amount in 2007 and anticipate using additional amounts in 2008. These NOLs are set to expire between 2017 and 2025. NOLs related to various states were also acquired and are set to expire based on the various laws of the specific states.

In addition, we may be subject to a corporate-level tax on any taxable disposition of HAL’s pre-acquisition assets that occurs within ten years after the June 1, 2006 acquisition. The corporate-level tax would be assessed only to the extent of the built-in gain that existed on the date of acquisition, based on the fair market value of the asset on June 1, 2006. We do not expect to dispose of any asset included in the HAL acquisition if such a disposition would result in the imposition of a material tax liability, and no such sales have taken place through December 31, 2008. Accordingly, we have not recorded a deferred tax liability associated with this corporate-level tax. Gains from asset dispositions occurring more than 10 years after the acquisition will not be subject to this corporate-level tax. However, we may dispose of HAL assets before the 10-year period if it is able to complete a tax-deferred exchange.

23. Dividends

Dividend payments per share to the common stockholders were characterized in the following manner for tax purposes:

	2008		2007		2006
Ordinary income	$	0.59	$	1.40	$	1.42
Capital gain		1.17		0.24		0.12
Total dividends paid	$	1.76	$	1.64	$	1.54

24. Segment Information

Our operations are organized into two segments—triple-net leases and multi-tenant leases. In the triple-net leases segment, we invest in healthcare related properties and lease the facilities to unaffiliated tenants under “triple-net” and generally “master” leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In the multi-tenant leases segment,

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December 31, 2008

we invest in healthcare related properties that have several tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). As of December 31, 2008, the multi-tenant leases segment is comprised exclusively of medical office buildings.

Non-segment revenues primarily consist of interest income on mortgages and unsecured loans and other income. Interest expense, depreciation and amortization and other expenses not attributable to individual facilities are not allocated to individual segments for purposes of assessing segment performance. Non-segment assets primarily consist of corporate assets including mortgages and unsecured loans, investment in unconsolidated joint ventures, cash, deferred financing costs and other assets not attributable to individual facilities.

Certain items in prior period financial statements have been reclassified to conform to current period presentation, including those required by SFAS No. 144. Summary information related to our reportable segments is as follows:

	Years ended December 31,
	2008		2007		2006
	(In thousands)
Revenues:
Triple-net leases	$	285,398	$	268,346	$	199,851
Multi-tenant leases		60,287		16,061		9,700
Non-segment		24,980		21,862		13,359
	$	370,665	$	306,269	$	222,910
Net operating income (1):
Triple-net leases	$	285,398	$	268,346	$	199,851
Multi-tenant leases		33,656		7,465		3,578
	$	319,054	$	275,811	$	203,429
Assets:
Triple-net leases	$	2,518,361	$	2,375,200	$	2,155,905
Multi-tenant leases		442,028		323,774		53,906
Non-segment		497,736		445,379		495,003
	$	3,458,125	$	3,144,353	$	2,704,814

(1) Net operating income (“NOI”) is a non-GAAP supplemental financial measure used to evaluate the operating performance of our facilities. We define NOI for our triple-net leases segment as rent revenues. For our multi-tenant leases segment, we define NOI as revenues minus medical office building operating expenses. In some cases, revenue for medical office buildings includes expense reimbursements for common area maintenance charges. NOI excludes interest expense and amortization of deferred financing costs, depreciation and amortization expense, general and administrative expense and discontinued operations. We present NOI as it effectively presents our portfolio on a “net” rent basis and provides relevant and useful information as it measures the operating performance at the facility level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. Furthermore, we believe that NOI provides investors relevant and useful information because it measures the operating performance of our real estate at the property level on an unleveraged basis. We believe that net income is the GAAP measure that is most directly comparable to NOI. However, NOI should not be considered as an alternative to net income as the primary indicator of operating performance as it excludes the items described above. Additionally, NOI as presented above may not be comparable to other REITs or companies as their definitions of NOI may differ from ours.

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December 31, 2008

A reconciliation of net income, a GAAP measure, to NOI, a non-conforming GAAP measure, is as follows:

	Years ended December 31,
	2008			2007			2006
	(In thousands)
Net income	$	268,138		$	224,458		$	185,577
Interest and other income		(24,980	)		(21,862	)		(13,359	)
Interest expense and amortization of deferred financing costs		101,045			97,639			85,541
Depreciation and amortization expense		117,473			91,187			63,380
General and administrative expense		26,051			24,429			15,654
Impairment of assets		—			—			—
Income from unconsolidated joint ventures		(3,903	)		(1,958	)		—
Minority interest in net loss of consolidated joint ventures		(131	)		(212	)		(421	)
Gain on debt extinguishment		(4,641	)		—			—
Gain on sale of facilities to unconsolidated joint venture, net		—			(46,045	)		—
Discontinued operations		(159,998	)		(91,825	)		(132,943	)
Net operating income from reportable segments	$	319,054		$	275,811		$	203,429

25. Commitments and Contingencies

Litigation

From time to time, we are a party to various other legal proceedings, lawsuits and other claims (some of which may not be insured) that arise in the normal course of our business. Regardless of their merits, these matters may force us to expend significant financial resources. Except as described herein, we are not aware of any other legal proceedings or claims that we believe may have, individually or taken together, a material adverse effect on our business, results of operations or financial position. However, we are unable to predict the ultimate outcome of pending litigation and claims, and if our assessment of our liability with respect to these actions and claims is incorrect, such actions and claims could have a material adverse effect on our business, results of operations or financial position.

In late 2004 and early 2005, we were served with several lawsuits in connection with a fire at the Greenwood Healthcare Center that occurred on February 26, 2003. At the time of the fire, the Greenwood Healthcare Center was owned by us and leased to and operated by Lexington Healthcare Group. There were a total of 13 lawsuits arising from the fire. Those suits have been filed by representatives of patients who were either killed or injured in the fire. The lawsuits seek unspecified monetary damages. The complaints allege that the fire was set by a resident who had previously been diagnosed with depression. The complaints allege theories of negligent operation and premises liability against Lexington Healthcare, as operator, and us as owner. Lexington Healthcare has filed for bankruptcy. The matters have been consolidated into one action in the Connecticut Superior Court Complex Litigation Docket at the Judicial District at Hartford, and are in various stages of discovery and motion practice. We have filed a motion for summary judgment with regard to certain pending claims and will be filing additional summary judgment motions for any remaining claims. Mediation was commenced with respect to most of the claims, and a settlement has been reached in 10 of the 13 pending claims within the limits of our commercial general liability insurance. We obtained a judgment of nonsuit in one case whereby it is now dismissed, and the two remaining claims will be subject to summary judgment motions and ongoing efforts at resolution. Summary judgment rulings are not expected until the Spring of 2009.

Lexington Insurance, which potentially owes insurance coverage for these claims to us, has filed a lawsuit against us which seeks no monetary damages, but which does seek a court order limiting its insurance coverage

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December 31, 2008

obligations to us. We have filed a counterclaim against Lexington Insurance demanding additional insurance coverage from Lexington in amounts up to $10 million. The parties to that case, which is pending on the Complex Litigation Docket for the Judicial District of Hartford, have filed cross-motions for summary judgment. Those motions will likely be decided in 2009.

We are being defended in the matter by our commercial general liability carrier. We believe that we have substantial defenses to the claims and that we have adequate insurance to cover the risks, should liability nonetheless be imposed. However, because the remaining claims are still in the process of discovery and motion practice, it is not possible to predict the ultimate outcome of these claims.

Line of Credit

Under the terms of an agreement with PMB, we agreed to extend to PMB a $10.0 million line of credit at an interest rate equal to LIBOR plus 175 basis points to fund certain costs of PMB with respect to the proposed development of multi-tenant medical office buildings. As of December 31, 2008, no amounts had been drawn down on the line of credit. In January 2009, PMB drew down $2.4 million on the line of credit.

Indemnities

We have entered into indemnification agreements with those partners who contributed appreciated property into NHP/PMB. Under these indemnification agreements, if any of the appreciated real estate contributed by the partners is sold by NHP/PMB in a taxable transaction within a specified number of years after the property was contributed, we will reimburse the affected partners for the federal and state income taxes associated with the pre-contribution gain that is specially allocated to the affected partner under the Code.

26. Related Party Transactions

In August 2008, Dr. Jeffrey Rush became a director of NHP. Dr. Rush is the Chairman of PMB. In August 2008, we acquired for $3.5 million a 44.95% interest in PMB SB, an entity that owns two multi-tenant medical office buildings (see Note 6). Dr. Rush, through an unaffiliated entity, has an ownership interest in PMB SB. In September 2008, we funded a mortgage loan secured by a medical office building in the amount of $47.5 million. Dr. Rush has an ownership interest in another unaffiliated entity that owns the medical office building that is security for this loan.

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December 31, 2008

27. Quarterly Financial Data (Unaudited)

Amounts in the tables below may not add across due to rounding differences, and certain items in prior period financial statements have been reclassified to conform to current year presentation, including those required by SFAS No. 144.

	Three months ended,
	March 31,		June 30,		September 30,		December 31,
	(In thousands except per share amounts)
2008:
Revenues	$	85,677	$	93,528	$	94,988	$	96,470
Income available to common stockholders		35,393		165,951		27,192		31,964
Diluted income available to common stockholders per share		0.37		1.69		0.27		0.31
Dividends per share		0.44		0.44		0.44		0.44
2007:
Revenues	$	69,144	$	73,679	$	79,831	$	83,616
Income available to common stockholders		22,257		83,642		53,951		51,174
Diluted income available to common stockholders per share		0.25		0.93		0.58		0.55
Dividends per share		0.41		0.41		0.41		0.41

During the three months ended December 31, 2008, we recognized a $4.6 million gain on debt extinguishment. During the three months ended December 31, 2007, we recognized $1.3 million of triple-net lease rental income and $0.4 million of other income related to a non-recurring settlement of delinquent tenant obligations. During the three months ended September 30, 2007, we recognized $1.1 million of triple-net lease rental income and $0.8 million of other income related to a non-recurring settlement of delinquent tenant obligations.

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SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Assisted and Independent Living Facilities:
Birmingham	AL	12,994	—	1,050		1,050	12,994	14,044	1,136	2000	2006
Decatur	AL	1,824	—	1,484		1,484	1,824	3,308	639	1987	1996
Hanceville	AL	2,447	—	197		197	2,447	2,644	755	1996	1996
Huntsville	AL	6,762	—	260		260	6,762	7,022	676	1999	2006
Mobile	AL	8,711	—	90		90	8,711	8,801	820	2000	2006
Muscle Shoals	AL	5,933	—	314		314	5,933	6,247	283	1999	2007
Scottsboro	AL	2,564	—	210		210	2,564	2,774	14	1998	2008
Benton	AR	1,968	—	182		182	1,968	2,150	595	1990	1998
Chandler	AZ	2,753	16	505		505	2,769	3,274	719	1998	1998
Tempe	AZ	15,413	—	1,440		1,440	15,413	16,853	1,315	1999	2006
Tucson	AZ	6,369	—	560		560	6,369	6,929	647	1999	2006
Banning	CA	12,976	337	375		375	13,313	13,688	1,514	2004	2003
Carmichael	CA	7,929	1,175	1,500		1,500	9,104	10,604	3,915	1984	1995
Chula Vista	CA	6,281	468	950		950	6,749	7,699	2,397	1989	1995
Encinitas (3)	CA	5,017	666	1,000		1,000	5,683	6,683	2,163	1984	1995
Mission Viejo (4)	CA	3,544	262	900		900	3,806	4,706	1,409	1985	1995
Novato (3)	CA	3,658	647	2,500		2,500	4,305	6,805	1,772	1978	1995
Palm Desert	CA	6,179	3,611	1,400		1,400	9,790	11,190	2,740	1989	1994
Placentia	CA	3,801	379	1,320		1,320	4,180	5,500	1,796	1982	1995
Rancho Cucamonga (3)	CA	4,156	539	610		610	4,695	5,305	1,707	1987	1995
Rancho Mirage	CA	13,391	259	1,630		1,630	13,650	15,280	744	1999	2007
San Dimas	CA	3,577	776	1,700		1,700	4,353	6,053	1,653	1975	1995
San Jose	CA	7,252	—	850		850	7,252	8,102	1,949	1998	1996
San Juan Capistrano (3)	CA	3,834	805	1,225		1,225	4,639	5,864	1,565	1985	1995
San Juan Capistrano	CA	6,344	620	700		700	6,964	7,664	2,439	1985	1995
Santa Maria	CA	2,649	118	1,500		1,500	2,767	4,267	1,212	1967	1995

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REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Vista	CA	3,701	904	350		350	4,605	4,955	1,655	1980	1996
Westminster	CA	4,883	—	2,350		2,350	4,883	7,233	558	2001	2005
Aurora	CO	7,923	66	919		919	7,989	8,908	3,450	1983	1995
Boulder	CO	4,811	14	833		833	4,825	5,658	1,566	1985	1995
Denver (5)	CO	28,682	—	2,350		2,350	28,682	31,032	5,327	1987	2002
Branford	CT	6,709	—	2,000		2,000	6,709	8,709	1,174	1999	2005
Madison	CT	16,032	1,400	4,000		4,000	17,432	21,432	2,381	2002	2004
Coral Springs	FL	6,985	427	915		915	7,412	8,327	581	1999	2006
Fort Myers (6)	FL	5,206	33	415		415	5,239	5,654	638	1996	2005
Fort Walton	FL	6,372	—	694		694	6,372	7,066	303	2000	2007
Hollywood	FL	9,887	—	1,994		1,994	9,887	11,881	549	1972	2007
Jacksonville	FL	2,770	20	226		226	2,790	3,016	783	1997	1997
Jacksonville (6)	FL	2,473	47	256		256	2,520	2,776	304	1997	2005
Leesburg (6)	FL	3,239	—	301		301	3,239	3,540	371	1999	2005
Ormond Beach (6)	FL	1,649	51	480		480	1,700	2,180	197	1997	2005
Palm Coast	FL	2,580	38	406		406	2,618	3,024	716	1997	1997
Pensacola	FL	5,667	919	408		408	6,586	6,994	1,363	1999	1998
Rotunda West	FL	2,628	28	123		123	2,656	2,779	728	1997	1997
Tallahasse	FL	9,218	45	696		696	9,263	9,959	2,147	1999	1998
Tallahasse	FL	1,679	1,311	450		450	2,990	3,440	151	1999	2006
Tamarac	FL	6,921	450	967		967	7,371	8,338	557	2000	2006
Tampa	FL	11,684	—	2,360		2,360	11,684	14,044	935	2001	2006
Tavares	FL	2,466	6	156		156	2,472	2,628	721	1997	1997
Titusville	FL	4,706	—	1,742		1,742	4,706	6,448	1,142	1987	2000
Augusta	GA	3,820	—	568		568	3,820	4,388	212	1997	2007
Jonesboro	GA	8,323	—	1,320		1,320	8,323	9,643	791	2000	2006
Marietta	GA	5,672	—	1,350		1,350	5,672	7,022	596	2000	2006

98

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Carmel	IN	3,861	84	805		805	3,945	4,750	1,638	1998	1997
Floyds Knobs	IN	8,945	—	740		740	8,945	9,685	—	2009	2008
Greensburg	IN	1,249	—	120		120	1,249	1,369	99	1999	2007
Indianapolis	IN	4,267	—	750		750	4,267	5,017	424	1998	2006
Michigan City (6)	IN	4,069	—	245		245	4,069	4,314	468	1998	2005
Michigan City (6)	IN	3,331	—	375		375	3,331	3,706	381	1999	2005
Monticello	IN	2,697	—	270		270	2,697	2,967	158	1999	2007
Derby (6)	KS	1,463	57	269		269	1,520	1,789	180	1994	2005
Lawrence	KS	3,822	—	932		932	3,822	4,754	1,019	1995	1998
Salina	KS	1,921	—	200		200	1,921	2,121	564	1996	1997
Salina	KS	2,887	—	329		329	2,887	3,216	1,407	1989	1998
Topeka	KS	2,955	87	424		424	3,042	3,466	1,424	1986	1998
Wellington (6)	KS	1,006	56	11		11	1,062	1,073	130	1994	2005
Kingston (7)	MA	12,780	5,123	1,000		1,000	17,903	18,903	1,863	1996	2006
Hagerstown	MD	4,664	373	533		533	5,037	5,570	1,124	1999	1998
Brownstown (8)	MI	30,484	—	660		660	30,484	31,144	2,427	2000	2006
Davidson (6)	MI	1,754	26	154		154	1,780	1,934	216	1997	2005
Delta (6)	MI	4,812	10	181		181	4,822	5,003	592	1998	2005
Delta (6)	MI	1,743	16	155		155	1,759	1,914	213	1998	2005
Farmington Hills (6)	MI	1,863	86	84		84	1,949	2,033	237	1994	2005
Farmington Hills (6)	MI	2,014	—	95		95	2,014	2,109	247	1994	2005
Grand Blanc (6)	MI	4,135	70	375		375	4,205	4,580	509	1998	2005
Grand Blanc (6)	MI	4,048	68	375		375	4,116	4,491	498	1998	2005
Haslett (6)	MI	4,231	35	847		847	4,266	5,113	507	1998	2005
Kentwood	MI	11,666	—	880		880	11,666	12,546	934	2001	2006
Troy (6)	MI	7,582	68	697		697	7,650	8,347	928	1998	2005
Troy (6)	MI	7,986	90	1,046		1,046	8,076	9,122	972	1998	2005

99

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Utica (6)	MI	5,102	33	245		245	5,135	5,380	630	1995	2005
Austin	MN	8,893	—	400		400	8,893	9,293	601	2002	2006
Blue Earth	MN	6,339	—	500		500	6,339	6,839	449	1999	2006
Fairbault (6)	MN	1,328	29	121		121	1,357	1,478	164	1997	2005
Mankato (6)	MN	1,064	25	90		90	1,089	1,179	132	1996	2005
Owatonna (6)	MN	1,762	—	60		60	1,762	1,822	212	1996	2005
Owatonna (6)	MN	2,239	—	70		70	2,239	2,309	258	1999	2005
Sauk Rapids (6)	MN	748	49	67		67	797	864	96	1997	2005
St. Louis	MN	10,423	—	900		900	10,423	11,323	728	2003	2006
Wilmar (6)	MN	1,977	43	57		57	2,020	2,077	247	1997	2005
Winona (6)	MN	1,436	36	65		65	1,472	1,537	181	1997	2005
Butler	MO	200	—	103		103	200	303	11	1995	2007
Lamar	MO	899	—	113		113	899	1,012	50	1996	2007
Nevada	MO	—	83	253		253	83	336	4	1993	2007
Nevada	MO	—	—	253		253	—	253	—	1996	2007
Greenville	MS	4,411	—	271		271	4,411	4,682	210	1999	2007
Asheboro	NC	7,054	—	200		200	7,054	7,254	491	1998	2006
Cramerton	NC	13,713	—	300		300	13,713	14,013	923	1999	2006
Harrisburg	NC	10,472	—	300		300	10,472	10,772	730	1997	2006
Hendersonville	NC	12,183	—	400		400	12,183	12,583	868	2005	2006
Hickory	NC	2,531	11	385		385	2,542	2,927	682	1997	1998
Hillsborough	NC	12,755	—	400		400	12,755	13,155	902	2005	2006
Newton	NC	11,707	—	400		400	11,707	12,107	804	2000	2006
Salisbury	NC	11,902	500	300		300	12,402	12,702	845	1999	2006
Shelby	NC	10,377	—	300		300	10,377	10,677	725	2000	2006
Sourthport	NC	12,283	—	300		300	12,283	12,583	872	2005	2006
Burleigh	ND	5,902	—	400		400	5,902	6,302	387	1994	2006

100

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Brick	NJ	2,428	—	1,102		1,102	2,428	3,530	369	1999	2002
Deptford	NJ	3,430	1	655		655	3,431	4,086	879	1998	1998
Albuquerque	NM	21,937	—	440		440	21,937	22,377	1,796	1998	2006
Sparks (9)	NV	5,119	—	505		505	5,119	5,624	1,609	1991	1997
Sparks (10)	NV	7,278	—	714		714	7,278	7,992	2,001	1993	1997
Centereach	NY	15,204	1,291	6,000		6,000	16,495	22,495	3,014	1973	2002
Manlius (6)	NY	10,080	48	500		500	10,128	10,628	1,239	1994	2005
Vestal	NY	10,394	—	750		750	10,394	11,144	1,685	1994	2004
Barberton (6)	OH	3,125	20	263		263	3,145	3,408	382	1997	2005
Englewood (6)	OH	2,277	25	260		260	2,302	2,562	278	1997	2005
Greenville	OH	2,311	3,246	215		215	5,557	5,772	672	1997	1997
Groveport	OH	10,516	—	1,080		1,080	10,516	11,596	792	1998	2006
Lancaster	OH	2,084	17	350		350	2,101	2,451	541	1998	1998
Lorain	OH	8,876	—	620		620	8,876	9,496	832	2000	2006
Marion (6)	OH	2,676	78	210		210	2,754	2,964	334	1998	2005
Medina	OH	10,198	—	500		500	10,198	10,698	804	1995	2006
Medina	OH	11,809	—	900		900	11,809	12,709	812	2000	2007
Mt. Vernon	OH	9,952	—	760		760	9,952	10,712	794	2001	2006
Springdale	OH	2,092	16	440		440	2,108	2,548	591	1997	1997
Zanesville	OH	12,421	—	830		830	12,421	13,251	801	1996	2007
Bartlesville (6)	OK	2,337	83	183		183	2,420	2,603	293	1997	2005
Bethany (6)	OK	1,212	77	114		114	1,289	1,403	155	1994	2005
Broken Arrow	OK	1,445	19	178		178	1,464	1,642	437	1996	1997
Oklahoma	OK	15,185	—	1,200		1,200	15,185	16,385	1,297	1999	2006
Beaverton (6)	OR	5,695	—	721		721	5,695	6,416	589	2000	2005
Bend (6)	OR	3,923	—	499		499	3,923	4,422	406	2001	2005
Forest Grove (11)	OR	3,152	—	401		401	3,152	3,553	1,171	1994	1995

101

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Gresham	OR	4,647	—	—		—	4,647	4,647	1,726	1988	1995
McMinnvillle (12)	OR	3,976	—	760		760	3,976	4,736	1,292	1989	1995
Troutdale (6)	OR	5,470	—	874		874	5,470	6,344	562	2000	2005
Dublin (6)	PA	2,533	—	310		310	2,533	2,843	289	1998	2005
Indiana	PA	2,706	—	194		194	2,706	2,900	541	1997	2002
Kingston	PA	2,262	—	196		196	2,262	2,458	126	1992	2007
Old Forge	PA	264	—	103		103	264	367	15	1990	2007
Peckville	PA	2,078	—	163		163	2,078	2,241	115	1989	2007
South Fayette Township	PA	9,159	262	653		653	9,421	10,074	2,255	1999	1998
Wyoming	PA	1,500	—	107		107	1,500	1,607	83	1993	2007
York	PA	4,534	179	413		413	4,713	5,126	1,148	1999	1998
East Green	RI	8,417	108	1,200		1,200	8,525	9,725	1,913	2000	1998
Lincoln	RI	9,612	29	477		477	9,641	10,118	2,618	2000	1998
Portsmouth	RI	9,155	92	1,200		1,200	9,247	10,447	2,133	1999	1998
Clinton	SC	2,560	—	87		87	2,560	2,647	1,035	1997	1998
Goose Cree	SC	2,336	—	619		619	2,336	2,955	467	1998	2002
Greenwood	SC	2,648	—	107		107	2,648	2,755	1,070	1997	1998
Brown	SD	3,125	—	400		400	3,125	3,525	222	1991	2006
Brown	SD	2,584	—	300		300	2,584	2,884	190	2000	2006
Lincoln	SD	8,273	—	700		700	8,273	8,973	600	2002	2006
Pennington	SD	5,575	—	300		300	5,575	5,875	368	1997	2006
Bartlett	TN	11,489	—	870		870	11,489	12,359	1,025	1999	2006
Bristol	TN	5,000	2,487	406		406	7,487	7,893	1,377	1999	1998
Chattanooga	TN	5,870	—	310		310	5,870	6,180	610	1999	2006
East Longmeadow	TN	18,208	5,399	1,360		1,360	23,607	24,967	740	1964	2008
Hixson	TN	5,146	—	50		50	5,146	5,196	38	2000	2008
Johnson City	TN	5,000	392	404		404	5,392	5,796	1,235	1999	1998

102

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Knoxville	TN	6,279	—	790		790	6,279	7,069	549	2001	2005
Memphis	TN	8,180	—	629		629	8,180	8,809	722	1989	2007
Memphis	TN	8,558	—	726		726	8,558	9,284	729	1985	2007
Memphis	TN	5,259	—	412		412	5,259	5,671	450	1989	2007
Murfreesboro	TN	5,131	405	499		499	5,536	6,035	1,261	1999	1998
Nashville	TN	5,688	—	960		960	5,688	6,648	597	1998	2006
Nashville	TN	5,835	—	1,000		1,000	5,835	6,835	608	1999	2006
Newport	TN	6,116	—	423		423	6,116	6,539	291	2000	2007
Arlington	TX	4,016	—	3,100		3,100	4,016	7,116	474	1998	2006
Austin	TX	21,486	—	1,360		1,360	21,486	22,846	1,763	2000	2006
Bedford (13)	TX	25,659	—	780		780	25,659	26,439	2,071	1999	2006
Conroe	TX	17,029	—	1,510		1,510	17,029	18,539	1,434	1997	2006
Dallas	TX	3,524	785	308		308	4,309	4,617	2,674	1981	1994
Denton	TX	1,425	33	185		185	1,458	1,643	436	1996	1996
Ennis	TX	1,409	26	119		119	1,435	1,554	430	1996	1996
Fort Worth	TX	10,417	—	640		640	10,417	11,057	911	2001	2005
Garland	TX	12,312	—	890		890	12,312	13,202	1,086	1999	2006
Houston	TX	7,892	—	493		493	7,892	8,385	2,072	1998	1997
Houston	TX	7,194	—	1,235		1,235	7,194	8,429	1,888	1998	1997
Houston	TX	8,945	—	985		985	8,945	9,930	2,180	1999	1997
Houston	TX	7,052	—	1,089		1,089	7,052	8,141	1,719	1999	1997
Houston	TX	21,320	—	870		870	21,320	22,190	1,751	1999	2006
Houston	TX	17,033	—	850		850	17,033	17,883	1,434	1998	2006
Irving	TX	11,991	—	930		930	11,991	12,921	1,062	1999	2006
Kerrville (6)	TX	2,129	88	195		195	2,217	2,412	267	1997	2005
Lake Jackson	TX	12,888	—	220		220	12,888	13,108	1,128	1998	2006
Lancaster (6)	TX	2,100	65	175		175	2,165	2,340	262	1997	2005

103

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Lewisville	TX	13,274	—	770		770	13,274	14,044	1,157	1998	2006
Paris	TX	1,465	32	166		166	1,497	1,663	447	1996	1996
San Antonio (6)	TX	3,910	100	359		359	4,010	4,369	485	1997	2005
San Antonio	TX	7,396	—	470		470	7,396	7,866	723	1999	2006
Temple (6)	TX	2,055	34	84		84	2,089	2,173	256	1997	2005
Temple	TX	12,738	—	370		370	12,738	13,108	1,073	1997	2006
Texas City	TX	11,060	—	550		550	11,060	11,610	949	1996	2006
Victoria	TX	12,122	—	330		330	12,122	12,452	1,028	1997	2006
Wharton	TX	8,714	—	930		930	8,714	9,644	776	1996	2006
Salem	VA	10,320	—	890		890	10,320	11,210	721	1998	2006
Bellevue	WA	4,467	—	766		766	4,467	5,233	1,163	1998	1996
Centralia	WA	5,254	77	610		610	5,331	5,941	314	1993	2007
Olympia	WA	10,954	106	870		870	11,060	11,930	625	1995	2007
Richland	WA	6,052	191	172		172	6,243	6,415	2,303	1990	1995
Sedro Wooley	WA	4,480	—	340		340	4,480	4,820	387	1996	2006
Spokane	WA	4,121	—	466		466	4,121	4,587	789	1959	2003
Tacoma	WA	5,208	22	403		403	5,230	5,633	1,500	1997	1996
Tacoma	WA	6,690	—	—		—	6,690	6,690	988	1988	2003
Tacoma	WA	12,560	272	1,090		1,090	12,832	13,922	1,066	1976	2007
Yakima	WA	5,122	39	500		500	5,161	5,661	1,414	1998	1997
Appleton	WI	1,260	—	154		154	1,260	1,414	51	1996	2008
Appleton	WI	1,120	—	136		136	1,120	1,256	45	1997	2008
Beloit	WI	1,274	—	80		80	1,274	1,354	71	1990	2007
Clinton	WI	1,124	—	80		80	1,124	1,204	66	1991	2007
Cudahy	WI	1,859	—	220		220	1,859	2,079	59	2001	2008
East Longmeadow	WI	1,147	—	150		150	1,147	1,297	50	1999	2008
East Longmeadow	WI	716	—	116		116	716	832	28	1994	2008

104

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
East Longmeadow	WI	1,959	—	120		120	1,959	2,079	61	1998	2008
East Longmeadow	WI	2,235	—	190		190	2,235	2,425	67	1998	2008
Glendale	WI	1,732	—	190		190	1,732	1,922	97	1999	2007
Glendale	WI	1,732	—	190		190	1,732	1,922	97	1999	2007
Glendale	WI	16,391	—	2,185		2,185	16,391	18,576	5,268	1988	1997
Greenfield (14)	WI	20,540	—	1,500		1,500	20,540	22,040	2,140	1999	2004
Hartland	WI	1,651	—	180		180	1,651	1,831	107	1985	2007
Horicon	WI	2,751	—	270		270	2,751	3,021	160	2002	2007
Jefferson	WI	2,036	—	130		130	2,036	2,166	70	1997	2008
Kenosha (6)	WI	615	54	17		17	669	686	81	1997	2005
Kenosha	WI	2,990	—	170		170	2,990	3,160	164	1996	2007
Menasha	WI	706	—	114		114	706	820	27	1994	2008
Menasha	WI	822	—	133		133	822	955	32	1993	2008
Menomonee (15)	WI	13,190	—	4,161		4,161	13,190	17,351	4,240	1989	1997
Middleton (6)	WI	1,866	48	155		155	1,914	2,069	232	1997	2005
Monroe	WI	1,345	—	160		160	1,345	1,505	87	1990	2007
Neenah (6)	WI	1,422	77	73		73	1,499	1,572	181	1996	2005
Neenah	WI	1,296	—	304		304	1,296	1,600	47	2006	2008
Oak Creek	WI	1,732	—	190		190	1,732	1,922	124	1997	2007
Oconomowoc	WI	3,831	—	300		300	3,831	4,131	692	1992	2004
Onalaska (6)	WI	2,303	65	62		62	2,368	2,430	290	1995	2005
Oshkosh (6)	WI	1,046	86	61		61	1,132	1,193	136	1996	2005
Pewaukee	WI	4,766	—	360		360	4,766	5,126	284	2001	2007
St. Francis	WI	2,465	—	190		190	2,465	2,655	146	2000	2007
St. Francis	WI	2,465	—	190		190	2,465	2,655	146	2000	2007
St. Francis (16)	WI	9,645	—	403		403	9,645	10,048	1,500	2001	2004
Stoughton	WI	2,178	—	230		230	2,178	2,408	129	1992	2007

105

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Sun Prairie	WI	436	89	85		85	525	610	61	1994	2005
Waukesha	WI	5,790	—	2,272		2,272	5,790	8,062	2,171	1978	1997
Waukesha (17)	WI	9,411	1,827	2,765		2,765	11,238	14,003	3,579	1985	1997
Wauwatosa (18)	WI	11,483	—	1,541		1,541	11,483	13,024	1,207	2005	2006
West Allis (19)	WI	8,117	2,911	682		682	11,028	11,710	3,057	1996	1997
West Springfield	WI	1,732	—	406		406	1,732	2,138	63	2007	2008
West Springfield	WI	1,566	—	570		570	1,566	2,136	62	2001	2008
West Springfield	WI	841	—	136		136	841	977	33	1993	2008
Hurricane	WV	5,418	232	705		705	5,650	6,355	1,267	1999	1998
		1,520,063	45,028	159,674		159,674	1,565,091	1,724,765	223,085
Skilled Nursing Facilities:
Benton	AR	4,659	9	685		685	4,668	5,353	1,411	1992	1998
Bryant	AR	4,889	16	320		320	4,905	5,225	1,482	1989	1998
Fort Smith	AR	3,318	—	350		350	3,318	3,668	258	2000	2007
Hot Spring	AR	2,321	—	54		54	2,321	2,375	1,486	1978	1986
Lake Villa	AR	4,318	15	261		261	4,333	4,594	1,146	1998	1998
Monticello	AR	3,295	8	300		300	3,303	3,603	874	1995	1998
Morrilton	AR	3,703	7	250		250	3,710	3,960	1,122	1988	1998
Morrilton	AR	4,995	2	308		308	4,997	5,305	1,322	1996	1998
Wynne	AR	4,165	7	327		327	4,172	4,499	1,261	1990	1998
Chowchilla	CA	1,119	—	109		109	1,119	1,228	594	1965	1987
Gilroy	CA	1,892	387	714		714	2,279	2,993	1,140	1968	1991
Orange	CA	5,082	—	1,141		1,141	5,082	6,223	2,100	1987	1992
East Longmeadow	CT	2,804	—	140		140	2,804	2,944	47	1969	2008
Hartford	CT	4,190	5,223	350		350	9,413	9,763	1,382	1969	2001
Winsted	CT	3,516	970	70		70	4,486	4,556	921	1960	2001
Fort Pierce	FL	3,038	—	125		125	3,038	3,163	2,093	1960	1985

106

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Jacksonville	FL	1,760	3,382	1,503		1,503	5,142	6,645	540	1997	2005
Jacksonville	FL	2,787	272	498		498	3,059	3,557	1,201	1965	1996
Pensacola	FL	1,833	—	77		77	1,833	1,910	985	1962	1987
Flowery Branch	GA	3,180	600	562		562	3,780	4,342	1,218	1970	1999
Buhl	ID	777	—	15		15	777	792	742	1913	1986
Lasalle	IL	2,703	—	127		127	2,703	2,830	1,835	1975	1989
Litchfield	IL	2,689	—	30		30	2,689	2,719	1,780	1974	1989
Berne	IN	1,904	—	150		150	1,904	2,054	236	1986	2007
Clinton	IN	6,440	—	330		330	6,440	6,770	876	1971	2007
Columbus	IN	3,147	4	200		200	3,151	3,351	308	1988	2007
East Longmeadow	IN	4,340	—	390		390	4,340	4,730	130	1975	2008
East Longmeadow	IN	5,116	—	620		620	5,116	5,736	148	1967	2008
Evansville	IN	5,324	—	280		280	5,324	5,604	3,396	1968	1989
Fowler	IN	3,223	—	300		300	3,223	3,523	95	1973	2008
Gas City	IN	5,377	64	100		100	5,441	5,541	718	1974	2007
Hartford City	IN	1,848	73	130		130	1,921	2,051	233	1988	2007
Huntington	IN	3,263	36	160		160	3,299	3,459	384	1987	2007
Indianapolis	IN	4,829	535	1,700		1,700	5,364	7,064	332	1968	2006
Knox	IN	1,412	—	300		300	1,412	1,712	45	1984	2008
Lawrenceburg	IN	3,834	—	720		720	3,834	4,554	59	1966	2008
Monticello	IN	827	—	180		180	827	1,007	37	1988	2008
Muncie	IN	4,344	3	220		220	4,347	4,567	579	1976	2007
Muncie	IN	7,295	85	160		160	7,380	7,540	823	2001	2007
New Castle	IN	5,173	—	43		43	5,173	5,216	3,295	1972	1989
Petersburg	IN	2,352	4	33		33	2,356	2,389	1,506	1970	1986
Portland	IN	5,313	46	240		240	5,359	5,599	867	1964	2007
Richmond	IN	2,520	—	114		114	2,520	2,634	1,614	1975	1986

107

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Terre Haute	IN	3,245	140	330		330	3,385	3,715	470	1965	2007
Wabash	IN	2,790	—	40		40	2,790	2,830	1,708	1974	1989
West Springfield	IN	9,673	—	420		420	9,673	10,093	138	1968	2008
Winchester	IN	2,430	10	80		80	2,440	2,520	286	1986	2007
Belleville	KS	1,887	—	213		213	1,887	2,100	991	1977	1993
Hiawatha	KS	788	34	150		150	822	972	382	1974	1998
Salina	KS	2,463	335	27		27	2,798	2,825	1,298	1981	1994
Topeka	KS	1,137	58	100		100	1,195	1,295	346	1973	1998
Wichita	KS	3,168	26	200		200	3,194	3,394	380	1965	2004
Yates Center	KS	705	—	18		18	705	723	306	1967	2002
Andover	MA	10,177	3,414	2,000		2,000	13,591	15,591	1,592	1992	2006
Brighton	MA	9,694	436	2,000		2,000	10,130	12,130	1,319	1995	2006
Danvers	MA	7,244	1,192	392		392	8,436	8,828	1,624	1998	1999
East Longmeadow	MA	16,462	—	700		700	16,462	17,162	1,390	1985	2006
Haverhill	MA	5,734	2,684	660		660	8,418	9,078	3,724	1973	1993
Kingston (7)	MA	4,890	444	2,000		2,000	5,334	7,334	938	1992	2006
Lowell	MA	3,945	4,677	2,500		2,500	8,622	11,122	789	1966	2006
Needham	MA	13,416	647	2,000		2,000	14,063	16,063	1,645	1996	2006
Reading	MA	8,184	396	1,000		1,000	8,580	9,580	1,200	1988	2006
South Hadley	MA	7,250	1,105	1,000		1,000	8,355	9,355	1,169	1988	2006
Springfield (20)	MA	8,250	1,278	2,000		2,000	9,528	11,528	685	1987	2007
Sudbury	MA	10,006	620	4,000		4,000	10,626	14,626	1,350	1997	2006
West Springfield	MA	9,432	1,515	580		580	10,947	11,527	983	1960	2006
Wilbraham	MA	4,473	396	1,000		1,000	4,869	5,869	885	1988	2006
Worcester	MA	12,182	1,790	500		500	13,972	14,472	1,598	1970	2006
Clinton	MD	5,607	356	400		400	5,963	6,363	3,400	1965	1987
Cumberland	MD	5,260	—	150		150	5,260	5,410	3,457	1968	1985

108

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Hagerstown	MD	4,316	170	215		215	4,486	4,701	2,913	1971	1985
Kensington	MD	5,737	423	1,470		1,470	6,160	7,630	1,259	1954	2002
Westminster	MD	6,795	216	80		80	7,011	7,091	4,487	1973	1985
Duluth	MN	7,377	4,175	1,014		1,014	11,552	12,566	3,693	1971	1997
Hopkins	MN	4,184	2,273	436		436	6,457	6,893	2,975	1961	1985
Minneapolis	MN	5,935	1,893	333		333	7,828	8,161	4,784	1941	1985
Ashland	MO	3,281	—	670		670	3,281	3,951	501	1993	2005
Columbia	MO	5,182	—	430		430	5,182	5,612	781	1994	2005
Dixon	MO	1,892	—	330		330	1,892	2,222	346	1989	2005
Doniphan	MO	4,943	—	120		120	4,943	5,063	822	1991	2005
Forsyth	MO	5,472	—	230		230	5,472	5,702	881	1993	2005
Maryville	MO	2,689	—	51		51	2,689	2,740	1,767	1972	1985
Seymour	MO	3,120	—	200		200	3,120	3,320	483	1990	2005
Silex	MO	1,536	—	870		870	1,536	2,406	306	1991	2005
St. Louis	MO	1,953	—	1,370		1,370	1,953	3,323	353	1988	2005
St. Louis	MO	7,924	—	683		683	7,924	8,607	1,321	1954	2007
Strafford	MO	4,441	—	530		530	4,441	4,971	698	1995	2005
Windsor	MO	2,969	—	350		350	2,969	3,319	467	1996	2005
Columbus	MS	3,520	197	750		750	3,717	4,467	1,084	1976	1998
Hendersonville	NC	2,244	—	116		116	2,244	2,360	1,475	1979	1985
Sparks	NV	3,294	355	740		740	3,649	4,389	1,528	1988	1991
Beacon	NY	20,710	—	1,000		1,000	20,710	21,710	2,162	2002	2006
Fishkill	NY	18,399	—	2,000		2,000	18,399	20,399	1,859	1996	2006
Highland	NY	13,992	—	1,500		1,500	13,992	15,492	1,523	1998	2006
Boardman	OH	7,046	326	60		60	7,372	7,432	5,036	1962	1997
Columbus	OH	4,333	—	343		343	4,333	4,676	2,371	1984	1991
Galion	OH	3,420	93	24		24	3,513	3,537	2,425	1967	1997

109

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Warren	OH	7,489	266	450		450	7,755	8,205	5,458	1967	1997
Washington Court House	OH	4,086	166	356		356	4,252	4,608	2,302	1984	1991
Grandfield	OK	—	—	—		—	—	—	—	1965	2007
Lawton	OK	4,946	282	196		196	5,228	5,424	429	1985	2007
Lawton	OK	201	75	130		130	276	406	25	1968	2007
Temple	OK	1,405	—	23		23	1,405	1,428	234	1971	2007
Tuttle	OK	1,489	340	35		35	1,829	1,864	282	1960	2007
Greensburg	PA	9,129	—	769		769	9,129	9,898	1,522	1971	2007
Kingston	PA	2,507	—	209		209	2,507	2,716	209	1995	2007
Peckville	PA	1,302	—	116		116	1,302	1,418	108	1991	2007
Beaufort (21)	SC	10,399	—	923		923	10,399	11,322	607	1970	2007
Bennettsville	SC	6,555	—	674		674	6,555	7,229	728	1958	2007
Conway	SC	10,423	—	1,158		1,158	10,423	11,581	434	1975	2007
Mt. Pleasant	SC	5,916	—	648		648	5,916	6,564	657	1977	2007
Celina	TN	861	—	150		150	861	1,011	435	1975	1993
Decatur	TN	3,329	27	193		193	3,356	3,549	1,003	1981	1998
Harrogate	TN	6,058	—	664		664	6,058	6,722	505	1990	2007
Jonesborough	TN	2,562	58	65		65	2,620	2,685	1,299	1982	1993
Madison	TN	6,415	500	1,120		1,120	6,915	8,035	1,937	1967	1998
Baytown	TX	2,010	80	61		61	2,090	2,151	995	1970	1990
Baytown	TX	2,496	224	90		90	2,720	2,810	1,252	1975	1990
Center	TX	1,532	213	22		22	1,745	1,767	806	1972	1990
Clarksville	TX	3,075	174	210		210	3,249	3,459	516	1989	2005
DeSoto	TX	4,662	1,046	610		610	5,708	6,318	845	1987	2005
Flowery Mound	TX	4,873	41	1,211		1,211	4,914	6,125	853	1995	2002
Garland	TX	1,727	212	238		238	1,939	2,177	898	1970	1990
Garland	TX	6,474	—	750		750	6,474	7,224	78	2008	2008

110

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Gilmer	TX	4,818	88	248		248	4,906	5,154	1,368	1990	1998
Houston	TX	4,262	301	408		408	4,563	4,971	2,374	1982	1990
Humble	TX	1,929	400	140		140	2,329	2,469	1,029	1972	1990
Huntsville	TX	2,037	32	135		135	2,069	2,204	996	1968	1990
Kirbyville	TX	2,533	258	350		350	2,791	3,141	326	1987	2006
Linden	TX	2,520	75	25		25	2,595	2,620	1,333	1968	1993
Marshall	TX	6,291	—	265		265	6,291	6,556	125	2008	2008
McKinney	TX	4,737	170	756		756	4,907	5,663	384	2006	2006
McKinney	TX	4,797	—	1,263		1,263	4,797	6,060	1,412	1967	2000
Mt. Pleasant	TX	2,505	158	40		40	2,663	2,703	1,352	1970	1993
Nacogdoche	TX	1,211	43	135		135	1,254	1,389	621	1973	1990
New Boston	TX	2,366	172	44		44	2,538	2,582	1,265	1966	1993
Omaha	TX	1,579	92	28		28	1,671	1,699	850	1970	1993
San Antonio	TX	4,536	—	—		—	4,536	4,536	842	1988	2002
San Antonio	TX	2,320	399	308		308	2,719	3,027	761	1986	2004
Sherman	TX	2,075	87	67		67	2,162	2,229	1,104	1971	1993
Texarkana	TX	1,244	—	87		87	1,244	1,331	1,008	1983	1986
Trinity	TX	2,466	237	510		510	2,703	3,213	320	1985	2006
Waxahachie	TX	3,493	406	319		319	3,899	4,218	1,937	1976	1987
West Springfield	TX	6,245	—	534		534	6,245	6,779	182	2008	2008
Wharton	TX	2,596	269	380		380	2,865	3,245	288	1988	2006
Salt Lake	UT	2,479	34	280		280	2,513	2,793	299	1972	2004
Annandale	VA	7,752	603	487		487	8,355	8,842	5,152	1963	1985
Charlottes	VA	4,620	337	362		362	4,957	5,319	3,068	1964	1985
Emporia	VA	6,960	238	473		473	7,198	7,671	743	1971	2007
Petersburg	VA	2,215	—	93		93	2,215	2,308	1,456	1972	1985
Petersburg	VA	2,945	—	94		94	2,945	3,039	1,936	1976	1985

111

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
South Boston	VA	1,335	—	176		176	1,335	1,511	373	1966	2007
Bellingham	WA	8,450	—	620		620	8,450	9,070	—	1999	2008
Everett	WA	7,045	—	830		830	7,045	7,875	872	1995	2004
Moses Lake	WA	4,307	1,326	304		304	5,633	5,937	2,230	1972	1994
Moses Lake	WA	2,385	—	164		164	2,385	2,549	1,139	1988	1994
Seattle	WA	5,752	182	1,223		1,223	5,934	7,157	2,137	1993	1994
Shelton	WA	4,682	—	327		327	4,682	5,009	1,405	1998	1997
Vancouver	WA	6,254	—	680		680	6,254	6,934	774	1991	2004
Chilton	WI	2,423	61	55		55	2,484	2,539	1,606	1963	1986
Florence	WI	1,529	5	15		15	1,534	1,549	980	1970	1986
Green Bay	WI	2,255	—	300		300	2,255	2,555	1,444	1965	1986
Sheboygan	WI	1,697	—	348		348	1,697	2,045	1,083	1967	1986
St. Francis	WI	535	—	80		80	535	615	342	1960	1986
Waukesha	WI	13,546	1,850	2,196		2,196	15,396	17,592	5,582	1973	1997
Wisconsin	WI	1,697	1,519	81		81	3,216	3,297	1,219	1972	1986
Logan	WV	3,006	—	100		100	3,006	3,106	689	1987	2004
Ravenswood	WV	2,986	—	250		250	2,986	3,236	669	1987	2004
South Charleston	WV	4,907	—	750		750	4,907	5,657	1,216	1987	2004
White Sulphur	WV	2,894	—	250		250	2,894	3,144	681	1987	2004
Casper	WY	5,816	—	930		930	5,816	6,746	1,136	1994	2004
Sheridan	WY	4,404	—	837		837	4,404	5,241	846	1989	2004
		771,467	56,468	84,479		84,479	827,935	912,414	208,345
Continuing Care Retirement Communities:
Chandler	AZ	7,039	3,868	1,980		1,980	10,907	12,887	1,941	1992	2002
Sterling	CO	2,716	—	400		400	2,716	3,116	1,335	1979	1994
Largo	FL	8,508	2,625	910		910	11,133	12,043	5,106	1972	2002
Northborough	MA	2,512	11,843	300		300	14,355	14,655	3,234	1968	1998

112

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Auburn	ME	10,502	—	400		400	10,502	10,902	825	1982	2007
Gorham	ME	15,590	—	800		800	15,590	16,390	1,019	1990	2007
York	ME	10,749	—	1,300		1,300	10,749	12,049	657	2000	2007
Tulsa	OK	7,267	951	500		500	8,218	8,718	599	1981	2007
Trenton	TN	3,004	—	174		174	3,004	3,178	626	1974	2000
Corpus Christi	TX	15,430	13,592	1,848		1,848	29,022	30,870	8,664	1985	1997
		83,317	32,879	8,612		8,612	116,196	124,808	24,006
Specialty Hospitals:
Scottsdale	AZ	5,924	195	242		242	6,119	6,361	3,123	1986	1988
Orange	CA	3,715	—	700		700	3,715	4,415	668	2000	2004
Houston	TX	3,272	7,703	1,097		1,097	10,975	12,072	906	1999	2004
The Woodlands	TX	2,472	—	100		100	2,472	2,572	536	1995	2004
Tucson	AZ	9,435	—	1,275		1,275	9,435	10,710	3,902	1992	1992
Tustin	CA	33,179	—	1,800		1,800	33,179	34,979	5,322	1991	2004
Conroe	TX	3,772	—	900		900	3,772	4,672	811	1992	2004
		61,769	7,898	6,114		6,114	69,667	75,781	15,268
Triple Net Medical Office Buildings:
Huntsville (22)	AL	11,061	—	5,645		5,645	11,061	16,706	584	1994	2007
Chula Vista (23)	CA	20,675	—	4,300		4,300	20,675	24,975	36	2005	2008
East Longmeadow	FL	2,244	—	280		280	2,244	2,524	19	1993	2008
East Longmeadow	FL	3,433	—	1,010		1,010	3,433	4,443	29	1984	2008
East Longmeadow	FL	2,786	—	950		950	2,786	3,736	23	1987	2008
Englewood	FL	2,314	—	1,220		1,220	2,314	3,534	19	1992	2008
Ft. Myers	FL	2,109	—	1,930		1,930	2,109	4,039	18	1989	2008
Naples	FL	2,736	—	1,000		1,000	2,736	3,736	20	1999	2008
Pt. Charlotte	FL	2,541	—	1,700		1,700	2,541	4,241	21	1985	2008

113

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Sarasota	FL	2,948	—	2,000		2,000	2,948	4,948	25	1996	2008
Venice	FL	2,642	—	1,700		1,700	2,642	4,342	22	1997	2008
Elkhart (24)	IN	2,743	—	107		107	2,743	2,850	107	1994	2007
LaPorte (24)	IN	1,676	—	93		93	1,676	1,769	65	1997	2007
Mishawaka (25)	IN	6,741	—	1,023		1,023	6,741	7,764	262	1993	2007
South Bend (26)	IN	3,013	—	328		328	3,013	3,341	117	1996	2007
Berlin	MD	1,717	—	—		—	1,717	1,717	14	1994	2008
East Longmeadow	MI	2,748	—	180		180	2,748	2,928	23	1997	2008
Madison Heights	MI	2,546	—	180		180	2,546	2,726	18	2002	2008
Houston	TX	21,952	—	1,000		1,000	21,952	22,952	1,244	2006	2007
		98,625	—	24,646		24,646	98,625	123,271	2,666
Medical Office Buildings:
Burbank (27)	CA	25,717	—	—		—	25,717	25,717	452	2004	2008
Castro Valley (28)	CA	5,568	—	—		—	5,568	5,568	109	1998	2008
Lynwood (29)	CA	17,122	70	—		—	17,192	17,192	391	1993	2008
San Gabriel (30)	CA	17,666	—	—		—	17,666	17,666	306	2004	2008
Santa Clara (31)	CA	29,508	—	6,870		6,870	29,508	36,378	532	2005	2008
Torrance	CA	8,674	85	2,980		2,980	8,759	11,739	207	1989	2008
Tamarac (32)	FL	4,704	154	1,492		1,492	4,858	6,350	191	1980	2007
Augusta (33)	GA	2,057	325	—	12	12	2,382	2,394	271	1972	2006
Augusta (33)	GA	2,359	288	587	324	911	2,647	3,558	349	1983	2006
Evans (33)	GA	891	19	—	198	198	910	1,108	116	1940	2006
Buffalo Grove (32)	IL	1,383	27	1,031	30	1,061	1,410	2,471	52	1992	2007
Grayslake (32)	IL	2,429	15	2,198		2,198	2,444	4,642	94	1996	2007
Gurnee (32)	IL	1,436	3	126		126	1,439	1,565	53	2005	2007
Gurnee (32)	IL	1,418	3	176		176	1,421	1,597	56	2002	2007
Gurnee (32)	IL	821	—	72		72	821	893	30	2002	2007

114

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Gurnee (32)	IL	5,445	3	492		492	5,448	5,940	197	2001	2007
Gurnee (32)	IL	1,489	5	147		147	1,494	1,641	49	1996	2007
Libertyville (32)	IL	5,064	114	153	37	190	5,178	5,368	164	1990	2007
Libertyville (32)	IL	2,598	7	10		10	2,605	2,615	72	1980	2007
Libertyville (32)	IL	3,301	—	336		336	3,301	3,637	114	1988	2007
Round Lake (32)	IL	891	19	1,956		1,956	910	2,866	46	1984	2007
Vernon Hills (32)	IL	946	18	1,914	35	1,949	964	2,913	58	1986	2007
Covington (33)	LA	6,026	626	—	11	11	6,652	6,663	606	1994	2006
Lafayette (33)	LA	972	41	—	36	36	1,013	1,049	108	1984	2006
Lafayette (33)	LA	2,145	240	—	30	30	2,385	2,415	255	1984	2006
Madeville (33)	LA	1,111	102	—	35	35	1,213	1,248	138	1987	2006
Metairie (33)	LA	3,729	350	—	31	31	4,079	4,110	369	1986	2006
Metairie (33)	LA	747	349	—	21	21	1,096	1,117	151	1980	2006
Slidell (32)	LA	1,720	446	1,421		1,421	2,166	3,587	136	1986	2007
Slidell (32)	LA	1,781	391	1,314		1,314	2,172	3,486	117	1990	2007
Arnold	MO	1,371	24	874		874	1,395	2,269	40	1999	2007
Fenton	MO	1,737	—	—		—	1,737	1,737	45	2003	2007
St. Louis	MO	14,229	—	—		—	14,229	14,229	407	2003	2007
St. Louis	MO	12,052	29	—		—	12,081	12,081	402	1993	2007
St. Louis	MO	3,818	76	—		—	3,894	3,894	129	1975	2007
St. Louis	MO	4,946	3	—		—	4,949	4,949	165	1980	2007
St. Louis	MO	2,176	35	1,364		1,364	2,211	3,575	109	1983	2007
Henderson (34)	NV	25,199	1	—		—	25,200	25,200	398	1999	2008
Reno (35)	NV	12,116	2	1,254		1,254	12,118	13,372	1,584	2004	2008
Columbus (32)	OH	10,738	27	698		698	10,765	11,463	404	1999	2007
Hillsboro (36)	OR	31,215	3	—		—	31,218	31,218	492	2003	2008
Irmo (37)	SC	8,754	—	2,177		2,177	8,754	10,931	309	2004	2007

115

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

Facility Type and Location		Initial Cost to Company Buiding and Improvements	Cost Capitalized Subsequent to Acquisition	Land (2)	Land Improvement	Gross Amount at which Carried at Close of Period (1)			Accumulated Depreciation	Original Construction Date	Date Acquired
						Land	Buildings and Improvements	Total
Walterboro (33)	SC	2,033	179	10		10	2,212	2,222	231	1998	2006
Jasper (33)	TN	3,862	85	7		7	3,947	3,954	308	1998	2006
Brownsville (33)	TX	381	5	351		351	386	737	55	1989	2006
Frisco (33)	TX	885	68	210		210	953	1,163	156	1996	2006
Houston (33)	TX	1,320	741	260	71	331	2,061	2,392	292	1982	2006
Houston (33)	TX	858	444	5		5	1,302	1,307	75	1982	2006
Keller (33)	TX	270	12	195	62	257	282	539	41	1995	2006
Mansfield (33)	TX	1,038	105	152		152	1,143	1,295	136	1998	2006
Christians (33)	VA	649	10	71	22	93	659	752	56	1997	2006
Midlothian (33)	VA	255	54	190	80	270	309	579	57	1985	2006
Richmond (33)	VA	3,038	939	4		4	3,977	3,981	319	1976	2006
Vancouver	WA	31,559	511	—		—	32,070	32,070	1,440	2001	2007
Vancouver	WA	6,379	—	—		—	6,379	6,379	320	1972	2007
Vancouver	WA	29,548	29	—		—	29,577	29,577	1,644	1980	2007
Vancouver	WA	11,609	—	—		—	11,609	11,609	563	1999	2007
Vancouver	WA	8,376	—	699		699	8,376	9,075	419	1994	2007
Vancouver	WA	4,223	—	2,969		2,969	4,223	7,192	257	1995	2007
Vancouver	WA	871	—	1,069		1,069	871	1,940	100	1997	2007
		395,223	7,082	35,834	1,035	36,869	402,305	439,174	16,742
Grand Total		2,930,464	149,355	319,359	1,035	320,394	3,079,819	3,400,213	490,112

(1) Also represents the approximate cost for federal income tax purposes.

(2) Gross amount at which land is carried at close of period also represents initial costs to the Company.

(3) Real estate is security for notes payable in the aggregate of $26,385,513 at December 31, 2008.

(4) Real estate is security for notes payable in the aggregate of $6,569,788 at December 31, 2008.

(5) Real estate is security for notes payable in the aggregate of $26,329,525 at December 31, 2008.

116

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

(6) Real estate is security for notes payable in the aggregate of $55,253,288 at December 31, 2008.

(7) Real estate is security for notes payable in the aggregate of $13,801,085 at December 31, 2008.

(8) Real estate is security for notes payable in the aggregate of $10,138,654 at December 31, 2008.

(9) Real estate is security for notes payable in the aggregate of $2,724,692 at December 31, 2008.

(10) Real estate is security for notes payable in the aggregate of $2,371,704 at December 31, 2008.

(11) Real estate is security for notes payable in the aggregate of $2,779,363 at December 31, 2008.

(12) Real estate is security for notes payable in the aggregate of $2,760,829 at December 31, 2008.

(13) Real estate is security for notes payable in the aggregate of $8,352,421 at December 31, 2008.

(14) Real estate is security for notes payable in the aggregate of $8,864,856 at December 31, 2008.

(15) Real estate is security for notes payable in the aggregate of $8,658,764 at December 31, 2008.

(16) Real estate is security for notes payable in the aggregate of $6,000,000 at December 31, 2008.

(17) Real estate is security for notes payable in the aggregate of $5,394,225 at December 31, 2008.

(18) Real estate is security for notes payable in the aggregate of $6,600,000 at December 31, 2008.

(19) Real estate is security for notes payable in the aggregate of $5,150,000 at December 31, 2008.

(20) Real estate is security for notes payable in the aggregate of $5,170,210 at December 31, 2008.

(21) Real estate is security for notes payable in the aggregate of $4,888,176 at December 31, 2008.

(22) Real estate is security for notes payable in the aggregate of $6,646,518 at December 31, 2008.

(23) Real estate is security for notes payable in the aggregate of $16,000,000 at December 31, 2008.

(24) Real estate is security for notes payable in the aggregate of $2,190,597 at December 31, 2008.

(25) Real estate is security for notes payable in the aggregate of $3,869,417 at December 31, 2008.

(26) Real estate is security for notes payable in the aggregate of $1,592,727 at December 31, 2008.

(27) Real estate is security for notes payable in the aggregate of $14,437,118 at December 31, 2008.

(28) Real estate is security for notes payable in the aggregate of $2,917,046 at December 31, 2008.

(29) Real estate is security for notes payable in the aggregate of $9,935,275 at December 31, 2008.

(30) Real estate is security for notes payable in the aggregate of $9,968,490 at December 31, 2008.

(31) Real estate is security for notes payable in the aggregate of $24,000,000 at December 31, 2008.

(32) Real estate is security for notes payable in the aggregate of $45,485,901 at December 31, 2008.

(33) Real estate is security for notes payable in the aggregate of $39,071,314 at December 31, 2008.

(34) Real estate is security for notes payable in the aggregate of $13,092,334 at December 31, 2008.

(35) Real estate is security for notes payable in the aggregate of $8,223,974 at December 31, 2008.

(36) Real estate is security for notes payable in the aggregate of $21,319,198 at December 31, 2008.

(37) Real estate is security for notes payable in the aggregate of $8,256,067 at December 31, 2008.

117

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)

NATIONWIDE HEALTH PROPERTIES, INC.

DECEMBER 31, 2008

(Dollar amounts in thousands)

	Real Estate Properties			Accumulated Depreciation
Balances at December 31, 2005	$	2,042,746		$	344,224
Acquisitions		976,654			71,011
Improvements and Construction		14,426			3,186
Sales and Transfers to Assets Held for Sale		(185,039	)		(46,220	)
Balances at December 31, 2006		2,848,787			372,201
Acquisitions		661,801			92,325
Improvements and Construction		17,719			3,497
Sales and Transfers to Assets Held for Sale		(330,331	)		(57,158	)
Balances at December 31, 2007		3,197,976			410,865
Acquisitions		375,724			103,221
Improvements and Construction		45,544			4,147
Sales and Transfers to Assets Held for Sale		(219,031	)		(28,121	)
Balances at December 31, 2008	$	3,400,213		$	490,112

118

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial and Portfolio Officer, of the effectiveness of our disclosure controls and procedures. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based upon that evaluation, our Chief Executive Officer and Chief Financial and Portfolio Officer concluded that our disclosure controls and procedures were effective as of the end of the annual period covered by this report. No change in our internal control over financial reporting occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

The management of Nationwide Health Properties, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such item is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance to the company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial and Portfolio Officer, we assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2008. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Based on our assessment we believe that, as of December 31, 2008, the company’s internal control over financial reporting is effective.

The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

No changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the fourth quarter of 2008 that materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

119

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Stockholders of Nationwide Health Properties, Inc.

We have audited Nationwide Health Properties, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Nationwide Health Properties, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Nationwide Health Properties, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Nationwide Health Properties, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008 of Nationwide Health Properties, Inc. and our report dated February 16, 2009 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

Irvine, California

February 16, 2009

120

PART III

Item 9B. Other Information.

None.

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is presented (i) under the captions “Executive Officers of the Company” and “Business Code of Conduct & Ethics” in Item 1 of this report, and (ii) in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 5, 2009, under the captions “Directors Standing for Election,” “Directors Continuing in Office,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Stockholder Proposals for the 2010 Annual Meeting,” “Audit Committee” and “Board Composition,” and is incorporated herein by reference.

Item 11. Executive Compensation.

The information required by this item is presented under the captions “How are directors compensated?,” “Compensation Discussion and Analysis,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report on Executive Compensation” and “Executive Compensation” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 5, 2009, and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is presented under the caption “Stock Ownership” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 5, 2009, and is incorporated herein by reference.

The information required by this item is presented under the caption “Equity Compensation Plans” in Item 5 of this report, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is presented under the captions “Certain Relationships and Related Transactions,” “Compensation Committee Interlocks and Insider Participation” and “Board Composition” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 5, 2009, and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

The information required by this item is presented under the caption “Audit Fees” in our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 5, 2009, and is incorporated herein by reference.

121

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements.

	Page
Report of Independent Registered Public Accounting Firm	54
Consolidated Balance Sheets at December 31, 2008 and 2007	55
Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006	56
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2008, 2007 and 2006	57
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006	58
Notes to Consolidated Financial Statements	59
(2) Financial Statement Schedules
Schedule III Real Estate and Accumulated Depreciation	97

All other schedules have been omitted because the required information is not significant or is included in the financial statements or notes thereto, or is not applicable.

(b) Exhibits

Exhibit No.	Description
2.1	Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008, by and among the Company, Pacific Medical Buildings LLC (“PMB”), and certain of PMB’s affiliates, filed as Exhibit 2.1 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.(1)
2.2	First Amendment to Formation and Contribution Agreement and joint Escrow Instructions, dated as of March 10, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.2 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.(2)
2.3	Due Diligence Waiver and Second Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 14, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.3 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
2.4	Third Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 26, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.4 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
2.5	Fourth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 28, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.5 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
2.6	Fifth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of April 22, 2008, by and among the Company, PMB, and certain of PMB’s affiliates, filed as Exhibit 2.6 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
2.7	Sixth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of May 12, 2008, by and among the Company, PMB, and certain of PMB’s affiliates.

122

Exhibit No.	Description
2.8	Seventh Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of June 24, 2008, by and among the Company, PMB, and certain of PMB’s affiliates.
2.9	Eighth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of July 25, 2008, by and among the Company, PMB, and certain of PMB’s affiliates.
2.10	Ninth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of August 27, 2008, by and among the Company, PMB, and certain of PMB’s affiliates.
2.11	Tenth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of October 21, 2008, by and among the Company, PMB, and certain of PMB’s affiliates.
3.1	Charter of the Company, filed as Exhibit 3.2 to the Company’s Form 8-K dated August 1, 2008, and incorporated herein by this reference.
3.2	Bylaws of the Company, as amended and restated on February 10, 2009, filed as Exhibit 3.1 to the Company’s Form 8-K dated February 17, 2009, and incorporated herein by this reference.
4.1	Indenture dated as of August 19, 1997, between the Company and The Bank of New York, as Trustee, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (No. 333-32135) dated July 25, 1997, and incorporated herein by this reference.
4.2	Indenture dated as of January 13, 1999, between the Company and Chase Manhattan Bank and Trust Company, National Association, as Trustee, filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (No. 333-70707) dated January 15, 1999, and incorporated herein by this reference.
4.3	First Supplemental Indenture dated as of May 18, 2005, between the Company and J.P. Morgan Trust Company, National Association (formerly known as Chase Manhattan Bank and Trust Company, National Association), as trustee, filed as Exhibit 4.1 to the Company’s Form 8-K dated May 11, 2005, and incorporated herein by this reference.
4.4	Form of 6.00% Note Due 2015, filed as Exhibit 4.2 to the Company’s Form 8-K dated May 11, 2005, and incorporated herein by this reference.
4.5	Indenture, dated July 14, 2006, between the Company and J.P. Morgan Trust Company, National Association, filed as Exhibit 4.1 to the Company’s Form 8-K dated July 14, 2006, and incorporated herein by this reference.
4.6	Form of 6.50% Note Due 2011, filed as Exhibit 4.3 to the Company’s Form 8-K dated July 14, 2006, and incorporated herein by this reference.
4.7	Specimen Common Stock Certificate, filed as Exhibit 4.6 to the Company’s Registration Statement on Form S-3 (No. 333-127366) dated August 9, 2005, and incorporated herein by this reference.
4.8	Indenture, dated October 19, 2007, between the Company and The Bank of New York Trust Company, N.A., filed as Exhibit 4.1 to the Company’s Form 8-K dated October 19, 2007, and incorporated herein by this reference.
10.1	1989 Stock Option Plan of the Company, as Amended and Restated April 20, 2001, filed as Exhibit 10.4 to the Company’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by this reference.*
10.2	Form of Stock Option Agreement under the 1989 Stock Option Plan of the Company, as Amended and Restated April 20, 2001.*

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Exhibit No.	Description
10.3(a)	Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Appendix B to the Company’s Proxy Statement filed with the Commission pursuant to Section 14(a) of the Exchange Act on March 24, 2005, and incorporated herein by this reference.*
10.3(b)	First Amendment to the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, dated October 28, 2008, filed as Exhibit 10.1 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
10.4(a)	Nationwide Health Properties, Inc. Retirement Plan for Directors, as Amended and Restated April 20, 2006, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2006, and incorporated herein by this reference.*
10.4(b)	Amendment to the Nationwide Health Properties, Inc. Retirement Plan for Directors, as Amended and Restated April 20, 2006, filed as Exhibit 10.9 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
10.5	Amended and Restated Deferred Compensation Plan of the Company, dated October 28, 2008, filed as Exhibit 10.16 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
10.6	Form of Amended and Restated Deferred Compensation Election and Agreement under the Nationwide Health Properties, Inc. Amended and Restated Deferred Compensation Plan, filed as Exhibit 10.7 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
10.7	Form of Deferred Compensation Election and Agreement under the Nationwide Health Properties, Inc. Amended and Restated Deferred Compensation Plan, filed as Exhibit 10.8 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
10.8(a)	Amended and Restated Credit Agreement, dated as of October 20, 2005, among the Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and 23 additional banks, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by this reference.
10.8(b)	First Amendment to Amended and Restated Credit Agreement, dated as of December 15, 2006, among the Company, the Lender party thereto, JPMorgan Chase Bank, N.A., as administrative agent and 20 additional banks, filed as Exhibit 10.1 to the Company’s Form 8-K dated December 18, 2006, and incorporated herein by this reference.
10.9	Form of Indemnity Agreement for certain officers and directors of the Company, filed as Exhibit 10.11 to the Company’s Form 10-K for the year ended December 31, 1995, and incorporated herein by this reference.*
10.10	Executive Employment Security Policy, as Amended and Restated April 20, 2001, filed as Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by this reference.*
10.11	Form of Change in Control Agreement with certain officers of the Company, filed as Exhibit 10.10 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
10.12	Retirement and Severance Agreement, dated April 16, 2004, by and between the Company and R. Bruce Andrews, filed as Exhibit 10.1 to the Company’s Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by this reference.*
10.13	Second Amended and Restated Employment Agreement, dated as of October 28, 2008, by and between the Company and Douglas M. Pasquale, filed as Exhibit 10.11 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*

124

Exhibit No.	Description
10.14	Separation Agreement, dated April 5, 2005, by and between the Company and Mark L. Desmond, filed as Exhibit 10.1 to the Company’s Form 8-K dated April 5, 2005, and incorporated herein by this reference.*
10.15	Amended and Restated Stock Unit Award Agreement, dated as of December 31, 2008, by and between the Company and Douglas M. Pasquale.*
10.16	Form of Stock Unit Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.3 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
10.17	Form of Stock Appreciation Rights Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.4 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
10.18	Form of Performance Share Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.5 to the Company’s Form 8-K dated October 28, 2008, and incorporated herein by this reference.*
10.19	Amended and Restated Stock Unit Award Agreement, dated as of December 31, 2008, by and between the Company and Abdo H. Khoury.*
10.20	Amended and Restated Stock Unit Award Agreement, dated as of December 31, 2008, by and between the Company and Donald D. Bradley.*
10.21	Form of Restricted Stock Award Agreement under the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, filed as Exhibit 10.20 to the Company’s Form 10-K for the year ended December 31, 2007, and incorporated herein by this reference.*
10.22	Agreement and Plan of Merger, dated as of March 22, 2006, by and among Nationwide Health Properties, Inc., HAL Acquisition Corp., and Hearthstone Assisted Living, Inc., filed as Exhibit 2.1 to the Company’s Form 8-K dated March 28, 2006, and incorporated herein by this reference.
10.23(a)	Master Transactions Agreement, dated as of March 22, 2006, by and among Nationwide Health Properties, Inc., Hearthstone Operations, LLC, and Hearthstone Assisted Living, Inc., filed as Exhibit 2.2 to the Company’s Form 8-K dated March 28, 2006, and incorporated herein by this reference.
10.23(b)	Amendment to Master Transactions Agreement, dated May 31, 2006, by and among Nationwide Health Properties, Inc., Hearthstone Assisted Living, Inc. and Hearthstone Operations, LLC, filed as Exhibit 2.1 to the Company’s Form 8-K dated June 6, 2006, and incorporated herein by this reference.
10.24(a)	Master Lease Agreement, dated May 31, 2006, by and among the Company and the other entities listed on Schedule I thereto, filed as Exhibit 2.3 to the Company’s Form 8-K dated June 6, 2006, and incorporated herein by this reference.
10.24(b)	First Amendment to Master Lease and Letter of Credit Agreement and Consent of Guarantor, dated June 29, 2006 by and among the Company, the entities listed on the signature pages thereto as “Tenant,” and Hearthstone Senior Services, L.P., filed as Exhibit 10.1 to the Company’s Form 8-K/A dated June 30, 2006, and incorporated herein by this reference.
10.25	Purchase and Sale Agreement, dated as of February 6, 2008, between the Company and its Affiliated signatories thereto, and Emeritus Corporation, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.

125

Exhibit No.	Description
10.26	First Amendment to Purchase and Sale Agreement, dated as of March 25, 2008, by and among the Company and its Affiliated signatories thereto, and Emeritus Corporation, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
10.27	Letter Agreement entered into by and between the Company and David E. Snyder dated February 22, 2008, filed as Exhibit 10.1 to the Company’s Form 8-K dated January 29, 2008, and incorporated herein by this reference.*
10.28	Guaranty of Obligations, dated as of September 18, 2008, by and among Jeffrey L. Rush, Mark D. Toothacre, Elizabeth A. Powell, Kimberly B. Cochrane and Robert A. Rosenthal, as guarantors, and the Company.
10.29(a)	Form of Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., filed as Exhibit T to the Formation and Contribution Agreement and Joint Escrow Instructions, filed as Exhibit 2.1 to the Company’s Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by this reference.
10.29(b)	First Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of May 12, 2008.
10.29(c)	Second Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of February 9, 2009.
12	Ratio of Earnings to Fixed Charges.
21	Subsidiaries of the Company.
23.1	Consent of Ernst & Young LLP.
31	Rule 13a-14(a)/15d-14(a) Certifications of CEO and CFO.
32	Section 1350 Certifications of CEO and CFO.

(1) Exhibits D, E, P-2, V-1, V-2, W, X, Y and BB have been omitted but will be furnished supplementally to the Securities and Exchange Commission upon request.

(2) Exhibit V-1 has been omitted but will be furnished supplementally to the Securities and Exchange Commission upon request.

 * Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATIONWIDE HEALTH PROPERTIES, INC.
By:	/s/    DOUGLAS M. PASQUALE
	Douglas M. Pasquale
	President and Chief Executive Officer

Dated: February 18, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    CHARLES D. MILLER         Charles D. Miller	Chairman and Director	February 18, 2009
/s/    DOUGLAS M. PASQUALE         Douglas M. Pasquale	President, Chief Executive Officer and Director	February 18, 2009
/s/    ABDO H. KHOURY         Abdo H. Khoury	Executive Vice President and Chief Financial and Portfolio Officer (Principal Financial and Accounting Officer)	February 18, 2009
/s/    R. BRUCE ANDREWS         R. Bruce Andrews	Director	February 18, 2009
/s/    DAVID R. BANKS         David R. Banks	Director	February 18, 2009
/s/    RICHARD I. GILCHRIST         Richard I. Gilchrist	Director	February 18, 2009
/s/    WILLIAM K. DOYLE         William K. Doyle	Director	February 18, 2009
/s/    ROBERT D. PAULSON         Robert D. Paulson	Director	February 18, 2009
/s/    JEFFREY L. RUSH         Jeffrey L. Rush	Director	February 18, 2009
/s/    KEITH P. RUSSELL         Keith P. Russell	Director	February 18, 2009
/s/    JACK D. SAMUELSON         Jack D. Samuelson	Director	February 18, 2009

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EX-2.7

Exhibit 2.7

SIXTH AMENDMENT TO

FORMATION AND CONTRIBUTION AGREEMENT

AND JOINT ESCROW INSTRUCTIONS

THIS SIXTH AMENDMENT TO FORMATION AND CONTRIBUTION AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this “Amendment“) is made and entered into as of May 12, 2008, by and among (i) NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (“NHP“), (ii) NHP/PMB L.P., a Delaware limited partnership (the “Operating Partnership”), (iii) PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company (“PMB LLC“), (iv) PMB SPE SANTA CLARITA LLC, a California limited liability company (“Clarita LLC“), (v) PMB CHULA VISTA LLC, a California limited liability company (“Vista LLC“), (vi) LILIHA PARTNERS L.P., a California limited partnership (“Liliha LP“), (vii) ST. FRANCIS-LYNWOOD MEDICAL PLAZA L.P., a California limited partnership (“Francis LP“), (viii) EDEN MEDICAL PLAZA LP, a California limited partnership (“Eden LP“), (ix) PMB BURBANK #1 LLC, a California limited liability company (“Burbank 1 LLC“), (x) SAN GABRIEL VALLEY MEDICAL PLAZA LLC, a California limited liability company (“SG Valley LLC“), (xi) PMB GREEN VALLEY LLC, a Nevada limited liability company (“Green LLC“), (xii) THE PLAZA AT WASHOE, LLC, a Nevada limited liability company (“Washoe LLC“), (xiii) THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company (“Terrace LLC“), (xiv) PMB HILLSBORO LLC, an Oregon limited liability company (“Hillsboro LLC“), (xv) PMB TORRANCE 1 LLC, a California limited liability company (“Torrance LLC“), (xvi) PMB BURBANK #2 LLC, a California limited liability company (“Burbank 2 LLC“), (xvii) PDP ORANGE LLC, a Delaware limited liability company (“Orange LLC“), (xviii) PDP MISSION VIEJO LLC, a Delaware limited liability company (“Mission LLC“), (xix) PDP POMERADO LLC, a California limited liability company (“Pomerado LLC“), (xx) PMB PASADENA LLC, a California limited liability company (“Pasadena LLC“), and (xxi) PMB GILBERT LLC, a Delaware limited liability company (“Gilbert LLC“ and, together with Clarita LLC, Vista LLC, Liliha LP, Francis LP, Eden LP, Burbank 1 LLC, SG Valley LLC, Green LLC, Washoe LLC, Terrace LLC, Hillsboro LLC, Torrance LLC, Burbank 2 LLC, Orange LLC, Mission LLC, Pomerado LLC and Pasadena LLC, the “Transferors“).

R E C I T A L S

A. NHP, PMB LLC and the Transferors entered into that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008 (the “Original Contribution Agreement”), as amended by that certain First Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 10, 2008 (the “First Amendment”), as further amended by that certain Letter Agreement Re: Due Diligence Waiver Letter and Second Amendment to that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 14, 2008 (the “Second Amendment”), as further amended by that certain Third Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 26, 2008 (the “Third Amendment”), as further amended by that certain Fourth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 28, 2008 (the “Fourth Amendment”), and as further amended by that certain Fifth

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Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of April 22, 2008 (the “Fifth Amendment,” together with the Fourth Amendment, the Third Amendment, the Second Amendment, the First Amendment and the Original Contribution Agreement, the “Contribution Agreement”). All capitalized terms used but not otherwise defined herein shall have the meanings set forth for the same in the Contribution Agreement.

B. NHP, the Operating Partnership, PMB LLC and the Transferors desire to amend the Contribution Agreement in accordance with the terms and conditions set forth herein.

A G R E E M E N T

NOW, THEREFORE, in consideration of the mutual covenants contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NHP, the Operating Partnership, PMB LLC and the Transferors hereby agree as follows:

1. AMENDMENTS.

1.1 Supplemental Vista and Liliha Due Diligence Periods. The Contribution Agreement is hereby amended by deleting Section 4.1.4(c) thereof in its entirety and inserting the following in lieu thereof:

“(c) In addition to NHP’s right of termination with respect to all Properties as provided in Section 4.1.4(a) above, NHP and the Operating Partnership shall have until October 2, 2008 (the “Supplemental Vista/Liliha Due Diligence Period“) to order and obtain updated physical inspection and environmental condition reports with respect to the Property owned by Vista LLC (the “Updated Vista Diligence Reports“) and the Property leased by Liliha LP (the “Updated Liliha Diligence Reports“). If any such Updated Vista Diligence Report or Updated Liliha Diligence Report discloses any material physical property condition or material environmental condition with respect to the applicable Property that was not disclosed in any physical inspection report or environmental condition report obtained by NHP or the Operating Partnership prior to the Due Diligence Termination Date (it being understood that NHP and the Operating Partnership shall order and obtain such physical inspection and environmental condition reports with respect to the Property owned by Vista LLC or the Property leased by Liliha LP before such date) (each, a “New Material Condition“), then NHP shall have the right to terminate this Agreement with respect to the Property for which a New Material Condition has arisen, on or before the expiration of the Supplemental Vista/Liliha Due Diligence Period. In the event that NHP and the Operating Partnership are not entitled to exercise such termination right (i.e., because either NHP and the Operating Partnership fail to order or obtain any such Updated Vista Diligence Reports or Updated Liliha Diligence Reports before the expiration of the Supplemental Vista/Liliha Due Diligence Period or such Updated Vista Diligence Reports or Updated Liliha Diligence Reports do not disclose any New Material Condition) or fail to deliver a written notice to the

2

applicable Transferors and Escrow Agent exercising its termination right pursuant to this Section 4.1.4(c) with respect to any such Property on or before the expiration of the Supplemental Vista/Liliha Due Diligence Period, then NHP and the Operating Partnership shall be deemed to have waived its right to terminate this Agreement with respect to such Property pursuant to this Section 4.1.4(c) and shall proceed to Closing with respect to such Property in accordance with the terms hereof. In the event that NHP and/or the Operating Partnership timely and properly deliver a written notice of termination of this Agreement with respect to either such Property pursuant to this Section 4.1.4(c) (because of a New Material Condition), which notice shall also specify in reasonable detail NHP’s and/or the Operating Partnership’s basis therefore, then (i) the portion of this Agreement that relates to such Property shall automatically terminate and be of no further force or effect, (ii) the parties shall equally share the cancellation charges, if any, of Escrow Agent and Title Company with respect to such Property, and (iii) no party shall have any further rights or obligations hereunder with respect to such Property, other than pursuant to any provision hereof which expressly survives the termination of this Agreement with respect to such Property.”

1.2 Existing Property Closing Date. The Contribution Agreement is hereby amended by deleting the first sentence of Section 7.1.1 thereof in its entirety and inserting the following in lieu thereof:

“Subject to the provisions of this Agreement, the Closing with respect to all of the Existing Properties shall take place concurrently on April 1, 2008 or such other date as the parties hereto may agree; provided, however, that (a) the Closing of the Contribution Transaction relating to the Property leased by Green LLC shall take place on May 1, 2008, (b) the Closing of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall take place on May 29, 2008, (c) the Closing of the Contribution Transaction relating to the Property leased by Terrace LLC shall take place on July 1, 2008, and (d) the Closing of the Contribution Transactions relating to the Property owned by Vista LLC and the Property leased by Liliha LP shall take place on November 1, 2008. Notwithstanding anything to the contrary contained in Sections 7.1.3, 7.5.1 and 16.18 hereof, to the extent that any of the dates specified in the preceding sentence fall on a Saturday, Sunday or legal holiday, the Closing shall take place on the next Business Day, provided that, for purposes of any and all adjustments and prorations hereunder, the Closing Date shall be deemed to have occurred on the dates specified in the preceding sentence. Notwithstanding anything to the contrary contained in Sections 7.1.3 and 7.5.1 hereof, the Closing Date of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall be deemed to have occurred on June 1, 2008, for purposes of any and all adjustments and prorations hereunder.”

1.3 Investor Documents. Notwithstanding anything to the contrary contained in the Contribution Agreement (including Section 1.2.7 of the Third Amendment), Transferee shall have the right to delay the issuance of OP Units and any Certificates (including with respect to the Property formerly leased by Green LLC) to the extent it reasonably determines that any Investor Documents are materially incomplete or inaccurate (and delay its determination as to whether the applicable persons or entities are

3

“Accredited Investors” under the terms of the last sentence of Section 2.3(b) of the Contribution Agreement) for a reasonable period ending no later than May 16, 2008, and the delivery of the applicable Indemnity Pledge Agreements may be delayed until the day on which the delivery of each of the applicable Certificates has been made.

1.4 Hillsboro Loan Assumption. Notwithstanding that the lender of the Loan Obligation with respect to the Property leased by Hillsboro LLC has agreed to deliver a Release of the existing Guarantor in connection with the assumption of the Loan Obligation relating to such Property, such lender is also requiring as a condition to its consent to such assumption that each of Jeffery L. Rush, Mark D. Toothacre, Elizabeth A. Powell, Kimberly B. Cochrane, Robert A. Rosenthal and Evan M. Stone (collectively, the “Specified Principals”), execute and deliver at the Closing of the Contribution Transaction relating to such Property certain new guaranties and indemnities relating to the Loan Obligation in favor of such lender (collectively, the “New Hillsboro Guarantees”). Accordingly, at such Closing, NHP and the Operating Partnership shall execute and deliver to the applicable Transferor an agreement in form and substance reasonably acceptable to PMB LLC and NHP whereby NHP and the Operating Partnership shall indemnify, defend and hold harmless each of the Specified Principals for any liabilities first occurring or accruing under the New Hillsboro Guarantees or Loan Obligation from and after the applicable Closing Date of the Contribution Transaction with respect to such Property.

2. MISCELLANEOUS PROVISIONS.

2.1 Governing Law. This Amendment and the legal relations between the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to its principles of conflicts of law.

2.2 Counterparts. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument.

2.3 Headings. The Section headings of this Amendment are for convenience of reference only and shall not be deemed to modify, explain, restrict, alter or affect the meaning or interpretation of any provision hereof.

2.4 Construction. This Amendment shall not be construed more strictly against one party hereto than against any other party hereto merely by virtue of the fact that it may have been prepared by counsel for one of the parties.

2.5 Effect of Amendment. In the event of any inconsistency between the terms of the Contribution Agreement and the terms of this Amendment, the terms of this Amendment shall prevail.

2.6 Ratification. Except as otherwise expressly modified hereby, the Contribution Agreement shall remain in full force and effect, and all of the terms and

4

provisions of the Contribution Agreement, as herein modified, are hereby ratified and reaffirmed.

[Signature Pages Follow]

5

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

NHP:
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation
By:	/s/ Abdo H. Khoury
Name:	Abdo H. Khoury
Title:	Chief Financial & Portfolio Officer
	Executive Vice President
OPERATING PARTNERSHIP:
NHP/PMB L.P., a Delaware limited partnership
By:	NHP/PMB GP LLC,
	a Delaware limited liability company,
	its General Partner
By:	NHP Operating Partnership L.P.,
	a Delaware limited partnership,
	its Sole Member
By:	NHP GP LLC,
	a Delaware limited liability company,
	its General Partner
By:	Nationwide Health Properties, Inc.
	a Maryland corporation,
	its Sole Member
By:	/s/ Abdo H. Khoury
Name:	Abdo H. Khoury
Title:	Chief Financial & Portfolio Officer
	Executive Vice President

[Additional Signature Pages Follow]

Signature Page 1

PMB LLC:
PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company
By:	PMB, INC.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
TRANSFERORS:
PMB SPE SANTA CLARITA LLC, a Delaware limited liability company
By:	PMB Santa Clarita LLC,
	a California limited liability company,
	its Sole Member
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 2

PMB CHULA VISTA LLC,
a California limited liability company
By:	PMB SPE Chula Vista, Inc.,
	a Delaware corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
LILIHA PARTNERS L.P., a California limited partnership
By:	PMB SPE Honolulu, Inc.
	a California corporation,
	its General Partner
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
ST. FRANCIS-LYNWOOD MEDICAL PLAZA L.P.,
a California limited partnership
By:	PMB Lynwood, Inc.,
	a California corporation,
	its General Partner
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 3

EDEN MEDICAL PLAZA LP,
a California Limited Partnership
By:	PMB Castro Valley, Inc.,
	a California corporation,
	its General Partner
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PMB BURBANK #1 LLC, a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 4

SAN GABRIEL VALLEY MEDICAL PLAZA LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PMB GREEN VALLEY LLC, a Nevada limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 5

THE PLAZA AT WASHOE, LLC,
a Nevada limited liability company
By:	PMB Reno LLC,
	a Nevada limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company
By:	PMB South Meadows LLC,
	a Nevada limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 6

PMB HILLSBORO LLC,
an Oregon limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PMB TORRANCE 1 LLC, a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 7

PMB BURBANK #2 LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP ORANGE LLC, a Delaware limited liability company
By:	PMB Founders Orange LLC,
	a California limited liability company,
	its Administrative Agent
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 8

PDP MISSION VIEJO LLC,
a Delaware limited liability company
By:	PMB Founders Mission Viejo LLC,
	a California limited liability company,
	its Administrative Agent
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP POMERADO LLC, a California limited liability company
By:	PMB Poway LLC,
	a California limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 9

PMB PASADENA LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PMB GILBERT LLC, a Delaware limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

Signature Page 10

EX-2.8

Exhibit 2.8

SEVENTH AMENDMENT TO

FORMATION AND CONTRIBUTION AGREEMENT

AND JOINT ESCROW INSTRUCTIONS

THIS SEVENTH AMENDMENT TO FORMATION AND CONTRIBUTION AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this “Amendment”) is made and entered into as of June 24, 2008, by and among (i) NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (“NHP”), (ii) NHP/PMB L.P., a Delaware limited partnership (the “Operating Partnership”), (iii) PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company (“PMB LLC”), (iv) PMB CHULA VISTA LLC, a California limited liability company (“Vista LLC”), (v) LILIHA PARTNERS L.P., a California limited partnership (“Liliha LP”), (vi) THE PLAZA AT WASHOE, LLC, a Nevada limited liability company (“Washoe LLC”), (vii) THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company (“Terrace LLC”), (viii) PMB BURBANK #2 LLC, a California limited liability company (“Burbank 2 LLC”), (ix) PDP ORANGE LLC, a Delaware limited liability company (“Orange LLC”), (x) PDP MISSION VIEJO LLC, a Delaware limited liability company (“Mission LLC”), (xi) PDP POMERADO LLC, a California limited liability company (“Pomerado LLC”), (xii) PMB PASADENA LLC, a California limited liability company (“Pasadena LLC”), and (xiii) PMB GILBERT LLC, a Delaware limited liability company (“Gilbert LLC” and, together with Vista LLC, Liliha LP, Washoe LLC, Terrace LLC, Burbank 2 LLC, Orange LLC, Mission LLC, Pomerado LLC, and Pasadena LLC, the “Remaining Transferors”).

R E C I T A L S

A. (i) NHP, (ii) PMB LLC, (iii) the Remaining Transferors, and (iv) PMB SPE Santa Clarita LLC, a California limited liability company (“Clarita LLC”), St. Francis-Lynwood Medical Plaza L.P., a California limited partnership (“Francis LP”), Eden Medical Plaza LP, a California limited partnership (“Eden LP”), PMB Burbank #1 LLC, a California limited liability company (“Burbank 1 LLC”), San Gabriel Valley Medical Plaza LLC, a California limited liability company (“SG Valley LLC”), PMB Green Valley LLC, a Nevada limited liability company (“Green LLC”), PMB Torrance 1 LLC, a California limited liability company (“Torrance LLC”), and PMB Hillsboro LLC, an Oregon limited liability company (“Hillsboro LLC” and, together with Clarita LLC, Francis LP, Eden LP, Burbank 1 LLC, SG Valley LLC, Green LLC, and Torrance LLC, collectively, the “Previous Transferors”, and each a “Previous Transferor”), entered into that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008 (the “Original Contribution Agreement”), as amended by that certain First Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 10, 2008 (the “First Amendment”), as further amended by that certain Letter Agreement Re: Due Diligence Waiver Letter and Second Amendment to that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 14, 2008 (the “Second Amendment”), as further amended by that certain Third Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 26, 2008 (the “Third Amendment”), as further amended by that certain Fourth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 28, 2008 (the “Fourth Amendment”), as further amended by that certain Fifth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of April 22, 2008 (the “Fifth Amendment”), and as further amended by that certain Sixth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of

1

May 12, 2008 (the “Sixth Amendment,” together with the Fifth Amendment, the Fourth Amendment, the Third Amendment, the Second Amendment, the First Amendment and the Original Contribution Agreement, the “Contribution Agreement”). All capitalized terms used but not otherwise defined herein shall have the meanings set forth for the same in the Contribution Agreement.

B. NHP, the Operating Partnership, PMB LLC and the Remaining Transferors desire to amend the Contribution Agreement in accordance with the terms and conditions set forth herein.

A G R E E M E N T

NOW, THEREFORE, in consideration of the mutual covenants contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NHP, the Operating Partnership, PMB LLC and the Remaining Transferors hereby agree as follows:

1. AMENDMENTS.

1.1 Extension of Approval Period by AIG. The Contribution Agreement is hereby amended by deleting the last sentence of Section 16.25 thereof in its entirety and inserting the following in lieu thereof:

“In the event that PMB LLC fails to notify NHP in writing of the approval of this Agreement with respect to Mission LLC, Orange LLC and the applicable Properties by AIG on or before July 25, 2008, (a) this Agreement shall automatically terminate with respect to Mission LLC, Orange LLC and the applicable Properties, (b) Mission LLC, Orange LLC and the applicable Properties shall be removed and excluded from the terms of this Agreement, and (c) the remainder of the terms of this Agreement shall remain in full force and effect with respect to the other Transferors and Properties.”

1.2 Existing Property Closing Date. The Contribution Agreement is hereby amended by deleting the first sentence of Section 7.1.1 thereof in its entirety and inserting the following in lieu thereof:

“Subject to the provisions of this Agreement, the Closing with respect to all of the Existing Properties shall take place concurrently on April 1, 2008 or such other date as the parties hereto may agree; provided, however, that (a) the Closing of the Contribution Transaction relating to the Property leased by Green LLC shall take place on May 1, 2008, (b) the Closing of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall take place on May 29, 2008, (c) the Closing of the Contribution Transaction relating to the Property leased by Terrace LLC shall take place on August 1, 2008, and (d) the Closing of the Contribution Transactions relating to the Property owned by Vista LLC and the Property leased by Liliha LP shall take place on November 1, 2008. Notwithstanding anything to the contrary contained in Sections 7.1.3, 7.5.1 and 16.18 hereof, to the extent that any of the dates specified in the preceding sentence fall on a Saturday, Sunday or legal holiday, the Closing shall take place on the next Business Day, provided that, for purposes of any and all adjustments and prorations hereunder, the

2

Closing Date shall be deemed to have occurred on the dates specified in the preceding sentence. Notwithstanding anything to the contrary contained in Sections 7.1.3 and 7.5.1 hereof, the Closing Date of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall be deemed to have occurred on June 1, 2008, for purposes of any and all adjustments and prorations hereunder.”

2. PRIOR AMENDMENTS. Each of PMB LLC (on behalf of itself and the Previous Transferors) and the Remaining Transferors hereby acknowledges and agrees that from and after the date on which any Transferor consummates the Contribution Transaction to which it is a party, such Transferor is no longer required to execute any further amendment to the Contribution Agreement that does not directly affect such Transferor or such Transferor’s Contribution Transaction. Accordingly, NHP, the Operating Partnership, PMB LLC and the Remaining Transferors, each acknowledge and agree that, to the extent any Previous Transferor executed the Fifth Amendment and/or the Sixth Amendment (each, a “Post-Closing Amendment”) after the date such Previous Transferor consummated the Contribution Transaction to which it was party, such Post-Closing Amendment was unrelated to the Contribution Transaction involving such Previous Transferor and, therefore, such Previous Transferor’s execution thereof was in error and is hereby deemed withdrawn and no longer a part thereof.

3. MISCELLANEOUS PROVISIONS.

3.1 Governing Law. This Amendment and the legal relations between the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to its principles of conflicts of law.

3.2 Counterparts. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument.

3.3 Headings. The Section headings of this Amendment are for convenience of reference only and shall not be deemed to modify, explain, restrict, alter or affect the meaning or interpretation of any provision hereof.

3.4 Construction. This Amendment shall not be construed more strictly against one party hereto than against any other party hereto merely by virtue of the fact that it may have been prepared by counsel for one of the parties.

3.5 Effect of Amendment. In the event of any inconsistency between the terms of the Contribution Agreement and the terms of this Amendment, the terms of this Amendment shall prevail.

3.6 Ratification. Except as otherwise expressly modified hereby, the Contribution Agreement shall remain in full force and effect, and all of the terms and provisions of the Contribution Agreement, as herein modified, are hereby ratified and reaffirmed.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

NHP:
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation
By:	/s/ Donald D. Bradley
Name:	Donald D. Bradley
Title:	Chief Investment Officer
	Executive Vice President
OPERATING PARTNERSHIP:
NHP/PMB L.P., a Delaware limited partnership
By:	NHP/PMB GP LLC,
	a Delaware limited liability company,
	its General Partner
By:	NHP Operating Partnership L.P.,
	a Delaware limited partnership,
	its Sole Member
By:	NHP GP LLC,
	a Delaware limited liability company,
	its General Partner
By:	Nationwide Health Properties, Inc.
	a Maryland corporation,
	its Sole Member
By:	/s/ Donald D. Bradley
Name:	Donald D. Bradley
Title:	Chief Investment Officer
	Executive Vice President

[Additional Signature Pages Follow]

Signature Page 1

PMB LLC:
PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company
By:	PMB, INC.,
	a California corporation,
	its Manager
	By:	/s/ Mark Toothacre
		Mark Toothacre
		President
REMAINING TRANSFERORS:
PMB CHULA VISTA LLC, a California limited liability company
By:	PMB SPE Chula Vista, Inc.,
	a Delaware corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
LILIHA PARTNERS L.P., a California limited partnership
By:	PMB SPE Honolulu, Inc.
	a California corporation,
	its General Partner
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 2

THE PLAZA AT WASHOE, LLC,
a Nevada limited liability company
By:	PMB Reno LLC,
	a Nevada limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company
By:	PMB South Meadows LLC,
	a Nevada limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 3

PMB BURBANK #2 LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP ORANGE LLC, a Delaware limited liability company
By:	PMB Founders Orange LLC,
	a California limited liability company,
	its Administrative Agent
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 4

PDP MISSION VIEJO LLC,
a Delaware limited liability company
By:	PMB Founders Mission Viejo LLC,
	a California limited liability company,
	its Administrative Agent
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP POMERADO LLC, a California limited liability company
By:	PMB Poway LLC,
	a California limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 5

PMB PASADENA LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PMB GILBERT LLC, a Delaware limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

Signature Page 6

EX-2.9

Exhibit 2.9

EIGHTH AMENDMENT TO

FORMATION AND CONTRIBUTION AGREEMENT

AND JOINT ESCROW INSTRUCTIONS

THIS EIGHTH AMENDMENT TO FORMATION AND CONTRIBUTION AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this “Amendment”) is made and entered into as of July 25, 2008, by and among (i) NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (“NHP”), (ii) NHP/PMB L.P., a Delaware limited partnership (the “Operating Partnership”), (iii) PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company (“PMB LLC”), (iv) PMB CHULA VISTA LLC, a California limited liability company (“Vista LLC”), (v) LILIHA PARTNERS L.P., a California limited partnership (“Liliha LP”), (vi) THE PLAZA AT WASHOE, LLC, a Nevada limited liability company (“Washoe LLC”), (vii) THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company (“Terrace LLC”), (viii) PMB BURBANK #2 LLC, a California limited liability company (“Burbank 2 LLC”), (ix) PDP ORANGE LLC, a Delaware limited liability company (“Orange LLC”), (x) PDP MISSION VIEJO LLC, a Delaware limited liability company (“Mission LLC”), (xi) PDP POMERADO LLC, a California limited liability company (“Pomerado LLC”), (xii) PMB PASADENA LLC, a California limited liability company (“Pasadena LLC”), and (xiii) PMB GILBERT LLC, a Delaware limited liability company (“Gilbert LLC” and, together with Vista LLC, Liliha LP, Washoe LLC, Terrace LLC, Burbank 2 LLC, Orange LLC, Mission LLC, Pomerado LLC, and Pasadena LLC, the “Remaining Transferors”).

R E C I T A L S

A. (i) NHP, (ii) PMB LLC, (iii) the Remaining Transferors, and (iv) PMB SPE Santa Clarita LLC, a California limited liability company (“Clarita LLC”), St. Francis-Lynwood Medical Plaza L.P., a California limited partnership (“Francis LP”), Eden Medical Plaza LP, a California limited partnership (“Eden LP”), PMB Burbank #1 LLC, a California limited liability company (“Burbank 1 LLC”), San Gabriel Valley Medical Plaza LLC, a California limited liability company (“SG Valley LLC”), PMB Green Valley LLC, a Nevada limited liability company (“Green LLC”), PMB Torrance 1 LLC, a California limited liability company (“Torrance LLC”), and PMB Hillsboro LLC, an Oregon limited liability company (“Hillsboro LLC” and, together with Clarita LLC, Francis LP, Eden LP, Burbank 1 LLC, SG Valley LLC, Green LLC, and Torrance LLC, collectively, the “Previous Transferors”, and each a “Previous Transferor”), entered into that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008 (the “Original Contribution Agreement”), as amended by that certain First Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 10, 2008 (the “First Amendment”), as further amended by that certain Letter Agreement Re: Due Diligence Waiver Letter and Second Amendment to that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 14, 2008 (the “Second Amendment”), as further amended by that certain Third Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 26, 2008 (the “Third Amendment”), as further amended by that certain Fourth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 28, 2008 (the “Fourth Amendment”), as further amended by that certain Fifth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of April 22, 2008 (the “Fifth Amendment”), as further amended by that certain Sixth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of

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May 12, 2008 (the “Sixth Amendment”), and as further amended by that certain Seventh Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of June 24, 2008 (the “Seventh Amendment” and, together with the Sixth Amendment, the Fifth Amendment, the Fourth Amendment, the Third Amendment, the Second Amendment, the First Amendment and the Original Contribution Agreement, the “Contribution Agreement”). All capitalized terms used but not otherwise defined herein shall have the meanings set forth for the same in the Contribution Agreement.

B. NHP, the Operating Partnership, PMB LLC and the Remaining Transferors desire to amend the Contribution Agreement in accordance with the terms and conditions set forth herein.

A G R E E M E N T

NOW, THEREFORE, in consideration of the mutual covenants contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NHP, the Operating Partnership, PMB LLC and the Remaining Transferors hereby agree as follows:

1. AMENDMENTS.

1.1 Extension of Approval Period by AIG. The Contribution Agreement is hereby amended by deleting the last sentence of Section 16.25 thereof in its entirety and inserting the following in lieu thereof:

“In the event that PMB LLC fails to notify NHP in writing of the approval of this Agreement with respect to Mission LLC, Orange LLC and the applicable Properties by AIG on or before August 26, 2008, (a) this Agreement shall automatically terminate with respect to Mission LLC, Orange LLC and the applicable Properties, (b) Mission LLC, Orange LLC and the applicable Properties shall be removed and excluded from the terms of this Agreement, and (c) the remainder of the terms of this Agreement shall remain in full force and effect with respect to the other Transferors and Properties.”

1.2 Existing Property Closing Date. The Contribution Agreement is hereby amended by deleting the first sentence of Section 7.1.1 thereof in its entirety and inserting the following in lieu thereof:

“Subject to the provisions of this Agreement, the Closing with respect to all of the Existing Properties shall take place concurrently on April 1, 2008 or such other date as the parties hereto may agree; provided, however, that (a) the Closing of the Contribution Transaction relating to the Property leased by Green LLC shall take place on May 1, 2008, (b) the Closing of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall take place on May 29, 2008, (c) the Closing of the Contribution Transaction relating to the Property leased by Terrace LLC shall take place on September 1, 2008, and (d) the Closing of the Contribution Transactions relating to the Property owned by Vista LLC and the Property leased by Liliha LP shall take place on November 1, 2008. Notwithstanding anything to the contrary contained in Sections 7.1.3, 7.5.1 and 16.18 hereof, to the extent that any of the dates specified in the preceding sentence fall on

2

a Saturday, Sunday or legal holiday, the Closing shall take place on the next Business Day, provided that, for purposes of any and all adjustments and prorations hereunder, the Closing Date shall be deemed to have occurred on the dates specified in the preceding sentence. Notwithstanding anything to the contrary contained in Sections 7.1.3 and 7.5.1 hereof, the Closing Date of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall be deemed to have occurred on June 1, 2008, for purposes of any and all adjustments and prorations hereunder.”

2. MISCELLANEOUS PROVISIONS.

2.1 Governing Law. This Amendment and the legal relations between the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to its principles of conflicts of law.

2.2 Counterparts. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument.

2.3 Headings. The Section headings of this Amendment are for convenience of reference only and shall not be deemed to modify, explain, restrict, alter or affect the meaning or interpretation of any provision hereof.

2.4 Construction. This Amendment shall not be construed more strictly against one party hereto than against any other party hereto merely by virtue of the fact that it may have been prepared by counsel for one of the parties.

2.5 Effect of Amendment. In the event of any inconsistency between the terms of the Contribution Agreement and the terms of this Amendment, the terms of this Amendment shall prevail.

2.6 Ratification. Except as otherwise expressly modified hereby, the Contribution Agreement shall remain in full force and effect, and all of the terms and provisions of the Contribution Agreement, as herein modified, are hereby ratified and reaffirmed.

[Signature Pages Follow]

3

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

NHP:
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation
By:	/s/ Abdo H. Khoury
Name:	Abdo H. Khoury
Title:	Chief Financial & Portfolio Officer
	Executive Vice President
OPERATING PARTNERSHIP:
NHP/PMB L.P., a Delaware limited partnership
By:	NHP/PMB GP LLC,
	a Delaware limited liability company,
	its General Partner
By:	NHP Operating Partnership L.P.,
	a Delaware limited partnership,
	its Sole Member
By:	NHP GP LLC,
	a Delaware limited liability company,
	its General Partner
By:	Nationwide Health Properties, Inc.
	a Maryland corporation,
	its Sole Member
By:	/s/ Abdo H. Khoury
Name:	Abdo H. Khoury
Title:	Chief Financial & Portfolio Officer
	Executive Vice President

[Additional Signature Pages Follow]

Signature Page 1

PMB LLC:
PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company
By:	PMB, INC.,
	a California corporation,
	its Manager
	By:	/s/ Mark Toothacre
		Mark Toothacre
		President
REMAINING TRANSFERORS:
PMB CHULA VISTA LLC, a California limited liability company
By:	PMB SPE Chula Vista, Inc.,
	a Delaware corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
LILIHA PARTNERS L.P., a California limited partnership
By:	PMB SPE Honolulu, Inc.
	a California corporation,
	its General Partner
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 2

THE PLAZA AT WASHOE, LLC,
a Nevada limited liability company
By:	PMB Reno LLC,
	a Nevada limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company
By:	PMB South Meadows LLC,
	a Nevada limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 3

PMB BURBANK #2 LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC, a California limited liability company,
	its Manager
By:	PMB, Inc., a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP ORANGE LLC,
a Delaware limited liability company
By:	PMB Founders Orange LLC, a California limited liability company,
	its Administrative Agent
By:	Pacific Medical Buildings LLC, a California limited liability company,
	its Manager
By:	PMB, Inc., a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 4

PDP MISSION VIEJO LLC, a Delaware limited liability company
By:	PMB Founders Mission Viejo LLC,
	a California limited liability company,
	its Administrative Agent
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP POMERADO LLC, a California limited liability company
By:	PMB Poway LLC,
	a California limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 5

PMB PASADENA LLC, a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PMB GILBERT LLC, a Delaware limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

Signature Page 6

EX-2.10

Exhibit 2.10

NINTH AMENDMENT TO

FORMATION AND CONTRIBUTION AGREEMENT

AND JOINT ESCROW INSTRUCTIONS

THIS NINTH AMENDMENT TO FORMATION AND CONTRIBUTION AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this “Amendment”) is made and entered into as of August 27, 2008, by and among (i) NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (“NHP”), (ii) NHP/PMB L.P., a Delaware limited partnership (the “Operating Partnership”), (iii) PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company (“PMB LLC”), (iv) PMB CHULA VISTA LLC, a California limited liability company (“Vista LLC”), (v) LILIHA PARTNERS L.P., a California limited partnership (“Liliha LP”), (vi) THE PLAZA AT WASHOE, LLC, a Nevada limited liability company (“Washoe LLC”), (vii) THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company (“Terrace LLC”), (viii) PMB BURBANK #2 LLC, a California limited liability company (“Burbank 2 LLC”), (ix) PDP ORANGE LLC, a Delaware limited liability company (“Orange LLC”), (x) PDP MISSION VIEJO LLC, a Delaware limited liability company (“Mission LLC”), (xi) PDP POMERADO LLC, a California limited liability company (“Pomerado LLC”), (xii) PMB PASADENA LLC, a California limited liability company (“Pasadena LLC”), and (xiii) PMB GILBERT LLC, a Delaware limited liability company (“Gilbert LLC” and, together with Vista LLC, Liliha LP, Washoe LLC, Terrace LLC, Burbank 2 LLC, Orange LLC, Mission LLC, Pomerado LLC, and Pasadena LLC, the “Remaining Transferors”).

R E C I T A L S

A. (i) NHP, (ii) PMB LLC, (iii) the Remaining Transferors, and (iv) PMB SPE Santa Clarita LLC, a California limited liability company (“Clarita LLC”), St. Francis-Lynwood Medical Plaza L.P., a California limited partnership (“Francis LP”), Eden Medical Plaza LP, a California limited partnership (“Eden LP”), PMB Burbank #1 LLC, a California limited liability company (“Burbank 1 LLC”), San Gabriel Valley Medical Plaza LLC, a California limited liability company (“SG Valley LLC”), PMB Green Valley LLC, a Nevada limited liability company (“Green LLC”), PMB Torrance 1 LLC, a California limited liability company (“Torrance LLC”), and PMB Hillsboro LLC, an Oregon limited liability company (“Hillsboro LLC” and, together with Clarita LLC, Francis LP, Eden LP, Burbank 1 LLC, SG Valley LLC, Green LLC, and Torrance LLC, collectively, the “Previous Transferors”, and each a “Previous Transferor”), entered into that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008 (the “Original Contribution Agreement”), as amended by that certain First Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 10, 2008 (the “First Amendment”), as further amended by that certain Letter Agreement Re: Due Diligence Waiver Letter and Second Amendment to that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 14, 2008 (the “Second Amendment”), as further amended by that certain Third Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 26, 2008 (the “Third Amendment”), as further amended by that certain Fourth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 28, 2008 (the “Fourth Amendment”), as further amended by that certain Fifth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of April 22, 2008 (the “Fifth Amendment”), as further amended by that certain Sixth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of

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May 12, 2008 (the “Sixth Amendment”), as further amended by that certain Seventh Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of June 24, 2008 (the “Seventh Amendment”), and as further amended by that certain Eighth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of July 25, 2008 (the “Eighth Amendment”, and, together with the Seventh Amendment, the Sixth Amendment, the Fifth Amendment, the Fourth Amendment, the Third Amendment, the Second Amendment, the First Amendment and the Original Contribution Agreement, the “Contribution Agreement”). All capitalized terms used but not otherwise defined herein shall have the meanings set forth for the same in the Contribution Agreement.

B. NHP, the Operating Partnership, PMB LLC and the Remaining Transferors desire to amend the Contribution Agreement in accordance with the terms and conditions set forth herein.

A G R E E M E N T

NOW, THEREFORE, in consideration of the mutual covenants contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NHP, the Operating Partnership, PMB LLC and the Remaining Transferors hereby agree as follows:

1. AMENDMENTS.

1.1 Existing Property Closing Date. The Contribution Agreement is hereby amended by deleting the first sentence of Section 7.1.1 thereof in its entirety and inserting the following in lieu thereof:

“Subject to the provisions of this Agreement, the Closing with respect to all of the Existing Properties shall take place concurrently on April 1, 2008 or such other date as the parties hereto may agree; provided, however, that (a) the Closing of the Contribution Transaction relating to the Property leased by Green LLC shall take place on May 1, 2008, (b) the Closing of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall take place on May 29, 2008, (c) the Closing of the Contribution Transaction relating to the Property leased by Terrace LLC shall take place on October 1, 2008, and (d) the Closing of the Contribution Transactions relating to the Property owned by Vista LLC and the Property leased by Liliha LP shall take place on November 1, 2008. Notwithstanding anything to the contrary contained in Sections 7.1.3, 7.5.1 and 16.18 hereof, to the extent that any of the dates specified in the preceding sentence fall on a Saturday, Sunday or legal holiday, the Closing shall take place on the next Business Day, provided that, for purposes of any and all adjustments and prorations hereunder, the Closing Date shall be deemed to have occurred on the dates specified in the preceding sentence. Notwithstanding anything to the contrary contained in Sections 7.1.3 and 7.5.1 hereof, the Closing Date of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall be deemed to have occurred on June 1, 2008, for purposes of any and all adjustments and prorations hereunder.”

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2. MISCELLANEOUS PROVISIONS.

2.1 Governing Law. This Amendment and the legal relations between the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to its principles of conflicts of law.

2.2 Counterparts. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument.

2.3 Headings. The Section headings of this Amendment are for convenience of reference only and shall not be deemed to modify, explain, restrict, alter or affect the meaning or interpretation of any provision hereof.

2.4 Construction. This Amendment shall not be construed more strictly against one party hereto than against any other party hereto merely by virtue of the fact that it may have been prepared by counsel for one of the parties.

2.5 Effect of Amendment. In the event of any inconsistency between the terms of the Contribution Agreement and the terms of this Amendment, the terms of this Amendment shall prevail.

2.6 Ratification. Except as otherwise expressly modified hereby, the Contribution Agreement shall remain in full force and effect, and all of the terms and provisions of the Contribution Agreement, as herein modified, are hereby ratified and reaffirmed.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

NHP:
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation
By:	/s/ Donald D. Bradley
Name:	Donald D. Bradley
Title:	Chief Investment Officer
	Executive Vice President
OPERATING PARTNERSHIP:
NHP/PMB L.P., a Delaware limited partnership
By:	NHP/PMB GP LLC,
	a Delaware limited liability company,
	its General Partner
By:	NHP Operating Partnership L.P.,
	a Delaware limited partnership,
	its Sole Member
By:	NHP GP LLC,
	a Delaware limited liability company,
	its General Partner
By:	Nationwide Health Properties, Inc.,
	a Maryland corporation,
	its Sole Member
By:	/s/ Donald D. Bradley
Name:	Donald D. Bradley
Title:	Chief Investment Officer
	Executive Vice President

[Additional Signature Pages Follow]

Signature Page 1

PMB LLC:
PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company
By:	PMB, INC.,
	a California corporation,
	its Manager
	By:	/s/ Mark Toothacre
		Mark Toothacre
		President
REMAINING TRANSFERORS:
PMB CHULA VISTA LLC, a California limited liability company
By:	PMB SPE Chula Vista, Inc.,
	a Delaware corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
LILIHA PARTNERS L.P., a California limited partnership
By:	PMB SPE Honolulu, Inc.,
	a California corporation,
	its General Partner
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 2

THE PLAZA AT WASHOE, LLC,
a Nevada limited liability company
By:	PMB Reno LLC,
	a Nevada limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company
By:	PMB South Meadows LLC,
	a Nevada limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 3

PMB BURBANK #2 LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP ORANGE LLC, a Delaware limited liability company
By:	PMB Founders Orange LLC,
	a California limited liability company,
	its Administrative Agent
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 4

PDP MISSION VIEJO LLC,
a Delaware limited liability company
By:	PMB Founders Mission Viejo LLC,
	a California limited liability company,
	its Administrative Agent
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP POMERADO LLC, a California limited liability company
By:	PMB Poway LLC,
	a California limited liability company,
	its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 5

PMB PASADENA LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PMB GILBERT LLC, a Delaware limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company,
	its Manager
By:	PMB, Inc.,
	a California corporation,
	its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

Signature Page 6

EX-2.11

Exhibit 2.11

TENTH AMENDMENT TO

FORMATION AND CONTRIBUTION AGREEMENT

AND JOINT ESCROW INSTRUCTIONS

THIS TENTH AMENDMENT TO FORMATION AND CONTRIBUTION AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this “Amendment”) is made and entered into on October 21, 2008, but effective as of September 30, 2008 (the “Effective Date”), by and among (i) NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (“NHP”), (ii) NHP/PMB L.P., a Delaware limited partnership (the “Operating Partnership”), (iii) PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company (“PMB LLC”), (iv) PMB CHULA VISTA LLC, a California limited liability company (“Vista LLC”), (v) LILIHA PARTNERS L.P., a California limited partnership (“Liliha LP”), (vi) THE PLAZA AT WASHOE, LLC, a Nevada limited liability company (“Washoe LLC”), (vii) THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company (“Terrace LLC”), (viii) PMB BURBANK #2 LLC, a California limited liability company (“Burbank 2 LLC”), (ix) PDP ORANGE LLC, a Delaware limited liability company (“Orange LLC”), (x) PDP MISSION VIEJO LLC, a Delaware limited liability company (“Mission LLC”), (xi) PDP POMERADO LLC, a California limited liability company (“Pomerado LLC”), (xii) PMB PASADENA LLC, a California limited liability company (“Pasadena LLC”), (xiii) PMB GILBERT LLC, a Delaware limited liability company (“Gilbert LLC” and, together with Vista LLC, Liliha LP, Washoe LLC, Terrace LLC, Burbank 2 LLC, Orange LLC, Mission LLC, Pomerado LLC, and Pasadena LLC, the “Remaining Transferors”), and (xiv) PMB SOUTH MEADOWS LLC, a Nevada limited liability company (“New Terrace Transferor”).

R E C I T A L S

A. (i) NHP, (ii) PMB LLC, (iii) the Remaining Transferors, and (iv) PMB SPE Santa Clarita LLC, a California limited liability company (“Clarita LLC”), St. Francis-Lynwood Medical Plaza L.P., a California limited partnership (“Francis LP”), Eden Medical Plaza LP, a California limited partnership (“Eden LP”), PMB Burbank #1 LLC, a California limited liability company (“Burbank 1 LLC”), San Gabriel Valley Medical Plaza LLC, a California limited liability company (“SG Valley LLC”), PMB Green Valley LLC, a Nevada limited liability company (“Green LLC”), PMB Torrance 1 LLC, a California limited liability company (“Torrance LLC”), and PMB Hillsboro LLC, an Oregon limited liability company (“Hillsboro LLC” and, together with Clarita LLC, Francis LP, Eden LP, Burbank 1 LLC, SG Valley LLC, Green LLC, and Torrance LLC, collectively, the “Previous Transferors”, and each a “Previous Transferor”), entered into that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008 (the “Original Contribution Agreement”), as amended by that certain First Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 10, 2008 (the “First Amendment”), as further amended by that certain Letter Agreement Re: Due Diligence Waiver Letter and Second Amendment to that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 14, 2008 (the “Second Amendment”), as further amended by that certain Third Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 26, 2008 (the “Third Amendment”), as further amended by that certain Fourth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 28, 2008 (the “Fourth Amendment”), as further amended by that certain Fifth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions,

dated as of April 22, 2008 (the “Fifth Amendment”), as further amended by that certain Sixth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of May 12, 2008 (the “Sixth Amendment”), as further amended by that certain Seventh Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of June 24, 2008 (the “Seventh Amendment”), as further amended by that certain Eighth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of July 25, 2008 (the “Eighth Amendment”), and as further amended by that certain Ninth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of August 27, 2008 (the “Ninth Amendment,” and together with the Eighth Amendment, the Seventh Amendment, the Sixth Amendment, the Fifth Amendment, the Fourth Amendment, the Third Amendment, the Second Amendment, the First Amendment and the Original Contribution Agreement, the “Contribution Agreement”). All capitalized terms used but not otherwise defined herein shall have the meanings set forth for the same in the Contribution Agreement.

B. NHP, the Operating Partnership, PMB LLC, the Remaining Transferors and New Terrace Transferor desire to amend the Contribution Agreement in accordance with the terms and conditions set forth herein.

A G R E E M E N T

NOW, THEREFORE, in consideration of the mutual covenants contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NHP, the Operating Partnership, PMB LLC, the Remaining Transferors and New Terrace Transferor hereby agree as follows:

1. AMENDMENTS.

1.1 Joinder by New Terrace Transferor as a “Transferor” and Release of Terrace LLC. As further provided in Section 1.8 hereof, the parties acknowledge and agree that Terrace LLC shall not be a “Transferor” under the Contribution Agreement, as hereby amended, and in lieu thereof, New Terrace Transferor shall be a “Transferor” under the Contribution Agreement, as hereby amended, and New Terrace Transferor shall transfer, assign and convey the “Terrace Interest” (as defined below) to the Operating Partnership. Accordingly, Terrace LLC is hereby released from all of its representations, warranties, duties, covenants and obligations as a “Transferor” under the Contribution Agreement, as hereby amended, and New Terrace Transferor hereby joins as a “Transferor” under the Contribution Agreement, as hereby amended, and assumes all of the representations, warranties, duties, covenants and obligations of Terrace LLC under the Contribution Agreement, as hereby amended, with respect to the Terrace Interest and the “Terrace Property” (as defined below).

1.2 References to Contributed Properties. The parties agree that the column referencing the “Contributed Property” on the signature pages of each of the Joinder Agreement, the “Tax Protection Agreement” (as defined in the Tax Letter Agreement, the “TPA”), the Amended and Restated Partnership Agreement and the Registration Rights Agreement was for reference only and has not been updated in connection with each Closing as necessary to keep the information in such column accurate. Accordingly, the parties agree that such column is hereby deleted from each of the aforementioned agreements.

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1.3 Contribution Value Adjustments for Earn Outs. The Contribution Agreement is hereby amended by deleting Section 2.2(b)(ii) thereof in its entirety and inserting the following in lieu thereof:

“(ii) If the Closing of the Contribution Transaction with respect to any of the Properties described on Exhibits “A-1-1” through “A-1-12” attached hereto (each, an “Earn Out Property”) occurs prior to the Closing of the Contribution Transaction with respect to any other Earn Out Property, then the Contribution Value for each Earn Out Property that closes prior to the last Closing of all of the Earn Out Properties shall be paid and calculated in accordance with the terms of Section 2.2(b)(i) hereof and as if this Agreement had been terminated with respect to all of the “Premium Properties” (as hereinafter defined) for which Closings have not yet then occurred. As used herein, the term “Premium Properties” shall mean, collectively, all of the Earn Out Properties (including, without limitation, the Property leased by Liliha LP (the “Liliha Property”) and the Property leased by Washoe LLC (the “Washoe Property”)) other than the Property owned by Clarita LLC. In such event, the parties agree: (A) that so long as the Closings of the Contribution Transactions with respect to all of the Earn Out Properties other than the Liliha Property and the Washoe Property occur on or prior to December 31, 2008, then following the last of such Closings (the “Majority Earn Out Closing”), the Contribution Value for each Earn Out Property that previously closed shall be recalculated as soon as reasonably practicable following the Majority Earn Out Closing, as of the Closing of the Contribution Transaction for each such Earn Out Property, in accordance with the terms of Section 2.2(b)(i) hereof and as if this Agreement had been terminated with respect to the Liliha Property and the Washoe Property, and Transferee shall pay or deliver the amount by which such recalculated Contribution Value for each such Earn Out Property exceeds the Contribution Value previously paid for each such Earn Out Property as provided above promptly upon completion of such calculation; (B) that in the event that the Majority Earn Out Closing occurs after December 31, 2008, then the Contribution Value for each Earn Out Property that previously closed shall be recalculated on the Closing Date of the Majority Earn Out Closing, as of the Closing of the Contribution Transaction for each such Earn Out Property, in accordance with the terms of Section 2.2(b)(i) hereof and as if this Agreement had been terminated with respect to the Liliha Property and the Washoe Property, and Transferee shall pay or deliver the amount by which such recalculated Contribution Value for each such Earn Out Property exceeds the Contribution Value previously paid for each such Earn Out Property as provided above; (C) that upon the Closing of the Contribution Transaction with respect to the Liliha Property (the “Liliha Contribution”), the Contribution Value for each Earn Out Property that previously closed (including, if applicable, for the Washoe Property) shall be recalculated on the Closing Date of the Liliha Contribution, as of the Closing of the Contribution Transaction for each such Earn Out Property in accordance with the terms of Section 2.2(b)(i) hereof and as if this Agreement had been terminated with respect to the Washoe Property to the extent that the “Washoe Contribution” (as hereinafter defined) has not yet occurred, and Transferee shall pay or deliver the amount by which such recalculated Contribution Value for each such Earn Out Property exceeds the Contribution Value previously paid for each such Earn Out Property as provided above; and (D) that upon the Closing of the Contribution Transaction with respect to the Washoe Property (the “Washoe Contribution”), the Contribution Value for each Earn Out

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Property that previously closed (including, if applicable, for the Liliha Property) shall be recalculated on the Closing Date of the Washoe Contribution, as of the Closing of the Contribution Transaction for each such Earn Out Property in accordance with the terms of Section 2.2(b)(i) hereof and as if this Agreement has been terminated with respect to the Liliha Property to the extent that the Liliha Contribution has not yet occurred, and Transferee shall pay or deliver the amount by which such recalculated Contribution Value for each such Earn Out Property exceeds the Contribution Value previously paid for each such Earn Out Property as provided above.”

1.4 Existing Property Closing Date. The Contribution Agreement is hereby amended by deleting the first sentence of Section 7.1.1 thereof in its entirety and inserting the following in lieu thereof:

“Subject to the provisions of this Agreement, the Closing with respect to all of the Existing Properties shall take place concurrently on April 1, 2008 or such other date as the parties hereto may agree; provided, however, that (a) the Closing of the Contribution Transaction relating to the Property leased by Green LLC shall take place on May 1, 2008, (b) the Closing of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall take place on May 29, 2008, (c) the Closing of the Contribution Transactions relating to the Property owned by Vista LLC shall take place on October 31, 2008, (d) the Closing of the Contribution Transaction relating to the Property leased by Terrace LLC shall take place on December 1, 2008 or such earlier date as the parties hereto may agree, and (e) the Closing of the Contribution Transaction relating to the Property leased by Liliha LP shall take place on January 30, 2009. Notwithstanding anything to the contrary contained in Sections 7.1.3 and 7.5.1 hereof, (i) the Closing Date of the Contribution Transaction relating to the Property leased by Hillsboro LLC shall be deemed to have occurred on June 1, 2008, for purposes of any and all adjustments and prorations hereunder, (ii) the Closing Date of the Contribution Transactions relating to the Property owned by Vista LLC shall be deemed to have occurred on November 1, 2008, for purposes of any and all adjustments and prorations hereunder, and (iii) the Closing Date of the Contribution Transaction relating to the Property leased by Liliha LP shall be deemed to have occurred on February 1, 2009, for purposes of any and all adjustments and prorations hereunder.”

1.5 Supplemental Vista and Liliha Due Diligence Periods. The Contribution Agreement is hereby amended by deleting Section 4.1.4(c) thereof in its entirety and inserting the following in lieu thereof:

“(c) In addition to NHP’s right of termination with respect to all Properties as provided in Section 4.1.4(a) above, NHP and the Operating Partnership shall have (i) until October 2, 2008 (the “Supplemental Vista Due Diligence Period”) to order and obtain updated physical inspection and environmental condition reports with respect to the Property owned by Vista LLC (the “Updated Vista Diligence Reports”) and (ii) until the thirtieth (30^th) day prior to the date on which the Closing of the Contribution Transaction relating to the Property leased by Liliha LP is then scheduled to occur (the “Supplemental Liliha Due Diligence Period”) to order and obtain updated physical inspection and environmental condition reports with respect to the Property leased by Liliha LP (the “Updated Liliha Diligence Reports”). If any Updated Vista Diligence Reports or

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Updated Liliha Diligence Reports disclose any material physical property condition or material environmental condition with respect to the applicable Property that was not disclosed in any physical inspection report or environmental condition report obtained by NHP or the Operating Partnership prior to the Due Diligence Termination Date (it being understood that NHP and the Operating Partnership shall order and obtain such physical inspection and environmental condition reports with respect to the Property owned by Vista LLC or the Property leased by Liliha LP before the expiration of the Supplemental Vista Due Diligence Period or the Supplemental Liliha Due Diligence Period, as applicable) (each, a “New Material Condition”), then NHP shall have the right to terminate this Agreement with respect to the Property for which a New Material Condition has arisen, on or before the expiration of the Supplemental Vista Due Diligence Period or the Supplemental Liliha Due Diligence Period, as applicable. In the event that NHP and the Operating Partnership are not entitled to exercise such termination right (i.e., because either NHP and the Operating Partnership fail to order or obtain any such Updated Vista Diligence Reports or Updated Liliha Diligence Reports before the expiration of the Supplemental Vista Due Diligence Period or the Supplemental Liliha Due Diligence Period, as applicable, or such Updated Vista Diligence Reports or Updated Liliha Diligence Reports do not disclose any New Material Condition) or fail to deliver a written notice to the applicable Transferors and Escrow Agent exercising their termination right pursuant to this Section 4.1.4(c) with respect to any such Property on or before the expiration of the Supplemental Vista Due Diligence Period or the Supplemental Liliha Due Diligence Period, as applicable, then NHP and the Operating Partnership shall be deemed to have waived their right to terminate this Agreement with respect to such Property pursuant to this Section 4.1.4(c) and shall proceed to Closing with respect to such Property in accordance with the terms hereof. In the event that NHP and/or the Operating Partnership timely and properly deliver a written notice of termination of this Agreement with respect to either such Property pursuant to this Section 4.1.4(c) (because of a New Material Condition), which notice shall also specify in reasonable detail NHP’s and/or the Operating Partnership’s basis therefore, then (A) the portion of this Agreement that relates to such Property shall automatically terminate and be of no further force or effect, (B) the parties shall equally share the cancellation charges, if any, of Escrow Agent and Title Company with respect to such Property, and (C) no party shall have any further rights or obligations hereunder with respect to such Property, other than pursuant to any provision hereof which expressly survives the termination of this Agreement with respect to such Property.”

1.6 Changes Affecting Liliha. Notwithstanding anything to the contrary contained herein or in the Contribution Agreement, the parties acknowledge that a change in the conditions affecting the Property leased by Liliha LP (the “Liliha Property”) has occurred, and as a result, the parties agree that each of Liliha LP, NHP and/or the Operating Partnership, may elect by delivering written notice to the other parties at any time prior to the fifth (5^th) Business Day prior to the then scheduled Closing Date with respect to the Liliha Property, (a) to cause the Liliha Property, which is currently designated as an Existing Property to instead be designated as a Development Property for all purposes under the Contribution Agreement (in which case (i) the Closing of the Contribution Transaction relating to the Liliha Property shall not take place on the date set forth in the first sentence of Section 7.1.1 of the Contribution Agreement, but shall instead be scheduled based upon the delivery of the Completion Notice to be delivered with respect to the Liliha

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Property pursuant to the terms of the Contribution Agreement, which Completion Notice the parties hereby agree will be delivered on or before the tenth (10 ^th) Business Day after delivery of the notice electing to designate the Liliha Property as a Development Property, notwithstanding the terms of Section 4.4 of the Contribution Agreement to the contrary, and (ii) the terms of Section 4.1.4(c) of the Contribution Agreement (as amended hereby) to the extent applicable to the Liliha Property shall no longer apply), and/or (b) to terminate the portion of the Contribution Agreement relating to the Liliha Property (in which case the portion of the Contribution Agreement that relates to the Liliha Property shall automatically terminate and be of no further force or effect, the parties shall equally share the cancellation charges, if any, of Escrow Agent and Title Company with respect to the Liliha Property, and no party shall have any further rights or obligations with respect to the Liliha Property, other than pursuant to any provision of the Contribution Agreement which expressly survives the termination of the Contribution Agreement with respect to the Liliha Property).

1.7 Scrivener’s Error. The Contribution Agreement is hereby amended to correct a scrivener’s error by deleting clause (d) of the first sentence of Section 14.4 thereof in its entirety and inserting the following in lieu thereof: “(d) any matters specified in the penultimate sentence of Section 14.2 hereof”.

1.8 Contribution of the Terrace Property.

(a) Notwithstanding anything to the contrary contained in the Contribution Agreement (including, without limitation, Section 1.2.6 of the Third Amendment), the transfer, contribution and conveyance of the Property leased by Terrace LLC (the “Terrace Property”) shall not be structured as an Investment Entity Transaction as defined in Section 1.2 of the Contribution Agreement, and shall not be consummated in compliance with the requirements of Section 2.3(c) of the Contribution Agreement (i.e., Terrace LLC shall not transfer, contribute or convey the Terrace Property to a newly formed single asset Delaware limited liability company in exchange for Investment Interests therein, shall not distribute such Investment Interests to each Entity Transferor Party in redemption of their interests in Terrace LLC, and shall not cause each of its Entity Transferor Parties to transfer, contribute and convey their respective right, title and interest in and to the Investment Interests to the Operating Partnership pursuant to Sections 1.2, 2.3(c) and 4.3.1 of the Contribution Agreement); provided, however, that notwithstanding the foregoing and except as otherwise provided in this Section 1.8, the “Terrace Contribution” (as hereinafter defined and as structured in accordance with the terms of this Amendment) shall be considered to be a “Investment Entity Transaction” under the Contribution Agreement and the remaining provisions (other than Section 2.3(c) thereof and those provisions listed in this Section 1.8) relating to Investment Entity Transactions (such as the provisions of Section 7.5.1(c) of the Contribution Agreement) shall apply to the Terrace Contribution to the extent applicable. In addition, (i) Terrace LLC shall be considered included in the definition of “Investment Entity” under the Contribution Agreement (but shall not be a “Transferor” thereunder, and instead New Terrace Transferor shall be a “Transferor” thereunder), (ii) New Terrace Transferor, which holds a fifty percent (50%) membership interest in Terrace LLC (the “Terrace Interest”), shall be considered included in the definition of “Entity Transferor Party” under the Contribution Agreement (in addition to being a “Transferor” thereunder pursuant to clause (i) above and clause (b) of this Section 1.8), and (iii) Renown Businesses, a Nevada corporation (“Renown”), which is the landlord under the ground lease affecting the Terrace Property and which holds a fifty percent (50%) non-managing membership interest in Terrace LLC, shall be considered included in the definition of “Continuing Transferor Party” under the

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Contribution Agreement. Accordingly, notwithstanding anything to the contrary contained in the Contribution Agreement, New Terrace Transferor shall deliver an Assignment of Entity Interests transferring, contributing and conveying the Terrace Interest directly to the Operating Partnership (the “Terrace Contribution”), subject to the terms and conditions set forth in this Section 1.8 and in the Contribution Agreement, as applicable.

(b) New Terrace Transferor hereby (i) restates, as of the Effective Date, all of the representations and warranties made by Terrace LLC under the Contribution Agreement to the extent applicable to New Terrace Transferor or the Terrace Property and (ii) agrees to be bound, as of the Effective Date, by all obligations of Terrace LLC under the Contribution Agreement (including, without limitation, the obligations set forth in Section 14.2 of the Contribution Agreement). PMB LLC and New Terrace Transferor hereby represent and warrant to the Transferee that, as of the Effective Date, and to the knowledge of PMB LLC and New Terrace Transferor, (A) Terrace LLC has no obligations for borrowed money except for its Loan Obligations and has no other liabilities or obligations of any kind or nature, whether absolute, contingent or accrued, and whether due or to become due, except its Permitted Entity Liabilities and those expressly disclosed in writing to the Transferee, and that such representation and warranty shall be deemed to be incorporated into Section 8.17 of the Contribution Agreement and subject to the provisions of Section 8.18 of the Contribution Agreement, and (B) following the Terrace Contribution, any membership interests in Terrace LLC that are not transferred to the Operating Partnership shall, as of the Closing of the Terrace Contribution, be owned by Renown and that such interest owned by Renown shall constitute a fifty percent (50%) non-managing membership interest in Terrace LLC. New Terrace Transferor hereby agrees to indemnify, protect, defend and hold NHP and the Operating Partnership harmless from any Claims (other than (1) its Permitted Entity Liabilities or (2) liabilities to the extent that such liabilities are the responsibility or liability of Renown), including, without limitation any Claims for any Taxes, that relate to Terrace LLC and that relate to the period (or accrue) prior to the Closing of the Terrace Contribution (regardless of when due and payable), except to the extent prorated or otherwise apportioned pursuant to the Contribution Agreement, and that such indemnification shall be deemed to be incorporated into Section 14.2 of the Contribution Agreement and subject to Sections 14.3, 14.5 and 14.6 of the Contribution Agreement (but are expressly excluded from the limitations set forth in Section 14.4 thereof).

(c) Notwithstanding anything to the contrary contained in the Contribution Agreement, the Notice to be delivered by New Terrace Transferor pursuant to Section 2.3(a) of the Contribution Agreement on or before the tenth (10^th) Business Day prior to the Closing of the Terrace Contribution shall: (i) identify the names of the parties that are or, at the applicable Closing, will be members of New Terrace Transferor or their respective designees (the “Terrace Cash & OP Unit Recipients”), (ii) indicate the percentage of the Contribution Value for the Terrace Property that is allocable to each of the Terrace Cash & OP Unit Recipients (which percentage shall be considered to be the Entity Transferor Party Allocable Share with respect to the Terrace Property under the Contribution Agreement), which, together, shall equal fifty percent (50%) of the Contribution Value, since fifty percent (50%) of the Contribution Value will not be paid, but will be attributed to the interests retained by Renown in Terrace LLC (understanding that Renown’s fifty percent (50%) shall be considered to be the Investment Entity Transferor Allocable Share with respect to the Terrace Property under the Contribution Agreement), and (iii) with respect to the Entity Transferor Party Allocable Share of the Terrace

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Cash & OP Unit Recipients, identify (A) the percentage constituting the Cash Portion and the percentage to be treated as the “Cap-Ex Amount” (as defined below), and (B) the percentage constituting the OP Unit Portion. Notwithstanding anything to the contrary contained herein, if NHP reasonably determines that any person or entity identified in a Notice as a proposed recipient of OP Units is not an “Accredited Investor” (as defined in Rule 501 of the General Rules and Regulations promulgated under the Act), then Transferee may, in its sole and absolute discretion, deliver cash, in lieu of OP Units, to such person or entity.

(d) In connection with the Terrace Contribution, in addition to the applicable Transferee’s Closing Conditions set forth in Section 6.1 of the Contribution Agreement (with respect to which Transferee hereby specifically waives the conditions set forth in Sections 6.1.4 (Leases), 6.1.5 (Bill of Sale), 6.1.6 (Non-Foreign Affidavits), 6.1.10 (Loan Obligations), 6.1.12 (Investment Entity Formation Documents), 6.1.14 (Property Management Agreement) and 6.1.22 (Permitted Entity Liability Certificate) thereof) and the deliverables required by PMB LLC and New Terrace Transferor pursuant to Section 7.2 of the Contribution Agreement (with respect to which Transferee hereby specifically waives the deliverables set forth in Sections 7.2.2 (Conveyance Documents), 7.2.3 (Non-Foreign Affidavits), 7.2.4 (Assignment of Leases), 7.2.5 (Bill of Sale) and 7.2.10 (Property Management Agreement) thereof), the obligation of Transferee to complete the Terrace Contribution is subject to the following conditions precedent (and conditions concurrent, with respect to deliveries to be made by the parties at the Closing):

(i) New Terrace Transferor and each of the Terrace Cash & OP Unit Recipients shall deliver an original Non-Foreign Affidavit, together with any comparable affidavits and forms required by the State of Nevada (if any), duly executed by New Terrace Transferor and each of the Terrace Cash & OP Unit Recipients (or their respective attorneys-in-fact);

(ii) the Terrace Cash & OP Unit Recipients shall deliver two (2) original counterparts to the Indemnity Pledge Agreement and/or three (3) original counterparts to the Indemnity Cash Escrow Agreement required by Sections 6.1.21 and 7.2.18 of the Contribution Agreement, duly executed by each of the Terrace Cash & OP Unit Recipients (or their respective attorneys-in-fact);

(iii) Jeffrey L. Rush, Robert A. Rosenthal, Mark D. Toothacre, Elizabeth A. Powell and Kimberly B. Cochrane shall deliver an original certificate representing and warranting to Transferee that to their actual, current knowledge, without independent investigation or the duty to conduct an independent investigation, and without imputation of the knowledge of any other persons or entity, as of the Closing Date of the Terrace Contribution, Terrace LLC has no liabilities or obligations of any kind or nature, whether absolute, contingent or accrued, and whether due or to become due, except its Loan Obligations and its Permitted Entity Liabilities and those expressly disclosed in writing to the Transferee;

(iv) New Terrace Transferor shall have delivered evidence satisfactory to Transferee that Terrace LLC has been legally converted from a Nevada limited liability company to a Delaware limited liability company, which evidence shall include an original certified copy issued by the Nevada Secretary of State’s Office and the Delaware Secretary of State’s Office, of each document filed with respect to such conversion (or a PDF copy thereof);

8

(v) New Terrace Transferor shall deliver two (2) original counterparts to an Assignment of Entity Interests transferring the Terrace Interest (the “Terrace Assignment”), duly executed by New Terrace Transferor;

(vi) New Terrace Transferor shall deliver two (2) original counterparts to an amended and restated operating agreement for Terrace LLC, which shall be in substantially the form attached hereto as Exhibit “A” (the “Amended Terrace Operating Agreement”), duly executed by Renown;

(vii) New Terrace Transferor shall deliver two (2) original counterparts to an amendment to the ground lease affecting the Terrace Property (as amended, the “Terrace Ground Lease”), which shall be in substantially the form attached hereto as Exhibit “B” (the “Amendment to Terrace Ground Lease”), duly executed by Renown;

(viii) New Terrace Transferor shall deliver three (3) original counterparts to an agreement pursuant to which the Operating Partnership may cause PMB LLC, a California limited liability company (“PMB”), to purchase the Terrace Interest in certain circumstances, which shall be in substantially the form attached hereto as Exhibit “C” (the “Put Agreement”), duly executed by PMB (and each guarantor thereof);

(ix) New Terrace Transferor shall deliver three (3) original counterparts to an agreement evidencing the consent of Allianz Life Insurance Company of North America, a Minnesota corporation (“Allianz”) to the Terrace Contribution and the exercise of the Operating Partnership’s rights under the Put Agreement, which shall be in form and substance reasonably satisfactory to Transferee (the “Allianz Consent”), duly executed by Allianz; and

(x) New Terrace Transferor shall deliver (or cause to be delivered) four (4) original counterparts of an asset and property management agreement, which shall be in substantially the form of Exhibit “R” to the Contribution Agreement (as amended), provided that the parties agree that such agreement will also require that, for so long as Renown is a Member (as defined in the Amended Terrace Operating Agreement) of Terrace LLC, PMBRES shall, within ten (10) days after the end of each Interim Reporting Period (as defined in the Amended Terrace Operating Agreement), deliver to the Operating Partnership, initial drafts of such periodic interim reports as are required to be delivered to Renown pursuant to Section 6.5.5 of the Amended Terrace Operating Agreement (the “Terrace Property Management Agreement”), duly executed by PMBRES.

(e) In connection with the Terrace Contribution, in addition to the deliverables required by Transferor pursuant to Section 7.3 of the Contribution Agreement (with respect to which PMB LLC and New Terrace Transferor hereby specifically waive the deliverables set forth in Sections 7.3.2 (Conveyance Documents) and 7.3.3 (Assignment of Leases) thereof), the Transferee shall deliver:

(i) two (2) original counterparts to the Indemnity Pledge Agreement and/or three (3) original counterparts to the Indemnity Cash Escrow Agreement required by

9

Section 7.3.12 of the Contribution Agreement, duly executed by each of NHP and the Operating Partnership;

(ii) two (2) original counterparts to the Terrace Assignment, duly executed by the Operating Partnership;

(iii) two (2) original counterparts to the Amended Terrace Operating Agreement, duly executed by the Operating Partnership;

(iv) two (2) original counterparts to the Amendment to Terrace Ground Lease, duly executed by the Operating Partnership as the managing member of Terrace LLC under the Amended Terrace Operating Agreement;

(v) three (3) original counterparts to the Put Agreement, duly executed by the Operating Partnership;

(vi) four (4) original counterparts of the Terrace Property Management Agreement, duly executed by Terrace LLC; and

(vii) four (4) original counterparts of the Cross-Indemnity Agreement, which shall be in substantially the form attached hereto as Exhibit “D” (the “Cross-Indemnity Agreement”), duly executed by NHP and the Operating Partnership.

(f) The parties agree that, in accordance with Section 4.3.2 of the Contribution Agreement, for the 24-month period following the Terrace Contribution, Terrace LLC shall be treated as a partnership and not as an association taxable as a corporation and Terrace LLC shall not elect to be treated as an association taxable as a corporation.

(g) The parties agree that the Joinder Agreement to be executed in connection with the Terrace Contribution shall provide that the parties thereto agree that the TPA shall not apply to any “Transfer” (as defined in the TPA) of the Terrace Interest or the Terrace Property, which occurs (i) for any reason during the period from the first (1^st) anniversary of the Closing of the Terrace Contribution through the day prior to the second (2^nd) anniversary of the Closing of the Terrace Contribution or (ii) as a result of Renown’s exercise of any of its options to purchase the Terrace Interest or the Terrace Property pursuant to Section 7.8 of the Amended Terrace Operating Agreement or Section 3 of the Amendment to Ground Lease, respectively (and such transfer under clause (i) or (ii) above shall not be considered a “Tax Protection Period Transfer” (as defined in the TPA), and no “Make Whole Payment” (as defined in the TPA) shall be due from the Operating Partnership in connection therewith).

(h) The parties agree that Recitals H and I of the Contribution Agreement shall not be applicable to the Terrace Contribution and the following provisions shall apply in lieu thereof: (i) so long as some portion of the consideration payable with respect to the Terrace Contribution is paid in OP Units, for income tax purposes, the Terrace Contribution shall constitute an “assets-over” partnership merger within the meaning of Treasury Regulations Section 1.708-1(c)(3)(i), and, as a result, (A) the payment of cash in excess of the Cap-Ex Amount to the Cash Recipients shall be treated as a sale of such Cash Recipient’s interests in New Terrace Transferor and a purchase of such interests by the Operating Partnership for the

10

cash so paid under the terms of the Contribution Agreement, and (B) the Operating Partnership shall be treated as acquiring New Terrace Transferor’s interests in Terrace LLC attributable to the Cash Recipients’ interests in New Terrace Transferor in redemption of such interest, in each case, in accordance with Treasury Regulations Section 1.708-1(c)(4); and (ii) if no portion of the consideration payable with respect to the Terrace Contribution is paid in OP Units, the Terrace Contribution shall constitute a sale of the Entity Transferor Parties’ interests in Terrace LLC for income tax purposes.

(i) The parties agree that Sections 2.3 (e) and (f) of the Contribution Agreement shall not be applicable to the Terrace Contribution and the following provisions shall apply in lieu thereof:

(i) At the request of the Entity Transferor Parties, the Operating Partnership shall cooperate with New Terrace Transferor in good faith to treat all or a portion of the Cash Amount, as requested by the Entity Transferor Parties, as a reimbursement of preformation expenditures pursuant to Treasury Regulations Section 1.707-4(d) (the “Cap-Ex Amount”); and

(ii) The parties hereto intend and agree that to the extent any OP Units are received by OP Unit Recipients with respect to the Terrace Contribution: (A) for U.S. federal income tax purposes, the payment of cash to the Cash Recipients in the Terrace Contribution in excess of their allocable share of the Cap-Ex Amount (the “Excess Cash Amount”) shall be treated as a sale of the interests in New Terrace Transferor held by such Cash Recipients and a purchase of such interests by the Operating Partnership for the cash so paid under the terms of the Contribution Agreement, as hereby amended, in accordance with Treasury Regulations Section 1.708-1(c)(4); and (B) pursuant to such Treasury Regulation and for income tax purposes, New Terrace Transferor will be treated as (I) distributing the interests in Terrace LLC attributable to the Excess Cash Amount to the Operating Partnership in liquidation of the interests acquired by the Operating Partnership in exchange for the Excess Cash Amount, and (II) contributing the remaining portion interests in Terrace LLC to the Operating Partnership in exchange for the Cap-Ex Amount and the OP Unit Portion pursuant to Section 721 of the Code in a transaction in which no gain or loss is recognized and, immediately thereafter, distributing the OP Unit Portion to the OP Unit Recipients in liquidation of their interests in New Terrace Transferor. New Terrace Transferor will use its commercially reasonable efforts to cause each of its Cash Recipients to agree to the tax treatment described in the foregoing sentence at or prior to the Closing of the Terrace Contribution. The Operating Partnership shall file its tax returns consistent with the above-described transaction structure, including the treatment of the Cap-Ex Amount as a reimbursement of the preformation expenditures pursuant to Treasury Regulations Section 1.707-4(d), to the extent the Cash Recipients agree as provided above.

(iii) The parties hereto intend and agree that to the extent that New Terrace Transferor only receives the Cash Amount in consideration for the Terrace Contribution and no OP Units are issued in connection with Terrace Contribution, the Terrace Contribution shall be treated as a sale for U.S. federal income tax purposes. The parties hereto shall file their tax returns consistently with this Section 1.8(i).

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1.9 Contribution of the Sharp Rees-Stealy Property. In connection with the Contribution Transaction relating to the Sharp Rees-Stealy Property, Transferee hereby specifically acknowledges that neither PMBRES nor any of its Affiliates currently provide property management services to Vista LLC, any Affiliate of Vista LLC, or any third party in connection with the ownership or operation of the Sharp Rees-Stealy Property and, accordingly, Transferee hereby waives (a) the condition set forth in Section 6.1.14 (Property Management Agreement) of the Contribution Agreement, and (b) the requirement that PMB LLC and/or Vista LLC deliver a Property Management Agreement on the Closing Date in accordance with Section 7.2.10 of the Contribution Agreement. Notwithstanding the foregoing, PMBRES currently provides limited asset management services to Vista LLC in connection with the ownership and operation of the Sharp Rees-Stealy Property and, therefore, PMB LLC and/or Vista LLC agree that the obligation of Transferee to complete the Contribution Transaction relating to the Sharp Rees-Stealy Property is subject to the delivery by PMB LLC and/or Vista LLC of an “Asset and Property Management Agreement,” in substantially the form attached hereto as Exhibit “E”.

1.10 Property Management Agreement. The Contribution Agreement (including, without limitation, Section 1.6 of the Third Amendment) is hereby amended by deleting Exhibit “R” attached thereto in its entirety and inserting Exhibit “R” attached hereto in lieu thereof.

2. MISCELLANEOUS PROVISIONS.

2.1 Governing Law. This Amendment and the legal relations between the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to its principles of conflicts of law.

2.2 Counterparts. This Amendment may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument.

2.3 Headings. The Section headings of this Amendment are for convenience of reference only and shall not be deemed to modify, explain, restrict, alter or affect the meaning or interpretation of any provision hereof.

2.4 Construction. This Amendment shall not be construed more strictly against one party hereto than against any other party hereto merely by virtue of the fact that it may have been prepared by counsel for one of the parties.

2.5 Effect of Amendment. In the event of any inconsistency between the terms of the Contribution Agreement and the terms of this Amendment, the terms of this Amendment shall prevail.

2.6 Ratification. Except as otherwise expressly modified hereby, the Contribution Agreement shall remain in full force and effect, and all of the terms and provisions of the Contribution Agreement, as herein modified, are hereby ratified and reaffirmed.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

NHP:
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation
By:	/s/ Donald D. Bradley
Name:	Donald D. Bradley
Title:	Chief Investment Officer
	Executive Vice President
OPERATING PARTNERSHIP:
NHP/PMB L.P., a Delaware limited partnership
By:	NHP/PMB GP LLC,
	a Delaware limited liability company, its General Partner
By:	NHP Operating Partnership L.P.,
	a Delaware limited partnership, its Sole Member
By:	NHP GP LLC,
	a Delaware limited liability company, its General Partner
By:	Nationwide Health Properties, Inc.,
	a Maryland corporation, its Sole Member
By:	/s/ Donald D. Bradley
Name:	Donald D. Bradley
Title:	Chief Investment Officer
	Executive Vice President

[Additional Signature Pages Follow]

Signature Page 1

PMB LLC:
PACIFIC MEDICAL BUILDINGS LLC, a California limited liability company
By:	PMB, INC.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
REMAINING TRANSFERORS:
PMB CHULA VISTA LLC, a California limited liability company
By:	PMB SPE Chula Vista, Inc.,
	a Delaware corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
LILIHA PARTNERS L.P., a California limited partnership
By:	PMB SPE Honolulu, Inc.,
	a California corporation,
	its General Partner
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 2

THE PLAZA AT WASHOE, LLC,
a Nevada limited liability company
By:	PMB Reno LLC,
	a Nevada limited liability company, its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company, its Manager
By:	PMB, Inc.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
THE TERRACE AT SOUTH MEADOWS, LLC, a Nevada limited liability company
By:	PMB South Meadows LLC,
	a Nevada limited liability company, its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company, its Manager
By:	PMB, Inc.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 3

PMB BURBANK #2 LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company, its Manager
By:	PMB, Inc.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP ORANGE LLC, a Delaware limited liability company
By:	PMB Founders Orange LLC,
	a California limited liability company, its Administrative Agent
By:	Pacific Medical Buildings LLC,
	a California limited liability company, its Manager
By:	PMB, Inc.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 4

PDP MISSION VIEJO LLC,
a Delaware limited liability company
By:	PMB Founders Mission Viejo LLC,
	a California limited liability company, its Administrative Agent
By:	Pacific Medical Buildings LLC,
	a California limited liability company, its Manager
By:	PMB, Inc.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PDP POMERADO LLC, a California limited liability company
By:	PMB Poway LLC,
	a California limited liability company, its Manager
By:	Pacific Medical Buildings LLC,
	a California limited liability company, its Manager
By:	PMB, Inc.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 5

PMB PASADENA LLC,
a California limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company, its Manager
By:	PMB, Inc.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President
PMB GILBERT LLC, a Delaware limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company, its Manager
By:	PMB, Inc.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

[Additional Signature Pages Follow]

Signature Page 6

NEW TERRACE TRANSFEROR:
PMB South Meadows LLC, a Nevada limited liability company
By:	Pacific Medical Buildings LLC,
	a California limited liability company, its Manager
By:	PMB, Inc.,
	a California corporation, its Manager
By:	/s/ Mark Toothacre
	Mark Toothacre
	President

Signature Page 7

EXHIBIT “A”

FORM OF AMENDED TERRACE OPERATING AGREEMENT

See attached.

Exhibit A-1

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

THE TERRACE AT SOUTH MEADOWS, LLC

a Delaware Limited Liability Company

MEMBERSHIP INTERESTS IN THE TERRACE AT SOUTH MEADOWS, LLC, A DELAWARE LIMITED LIABILITY COMPANY, HAVE NOT BEEN REGISTERED WITH OR QUALIFIED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE. THE INTERESTS ARE BEING SOLD IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS. THE INTERESTS CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFERABILITY CONTAINED IN THE LIMITED LIABILITY COMPANY AGREEMENT OF THE TERRACE AT SOUTH MEADOWS, LLC, AND APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

Dated as of             , 2008

A-2

TABLE OF CONTENTS

		Page
ARTICLE 1 ORGANIZATIONAL MATTERS		A-7
1.1	Continuation; Organization	A-7
1.2	Name	A-7
1.3	Principal Place of Business; Other Places of Business	A-7
1.4	Business Purpose	A-7
1.5	Statutory Compliance	A-8
1.6	Term	A-8
1.7	Partnership Status for Income Tax Purposes	A-8
ARTICLE 2 DEFINITIONS		A-8
2.1	Definitions	A-8
ARTICLE 3 MEMBER CAPITAL, CAPITAL ACCOUNTS, LOANS AND LIABILITIES		A-19
3.1	Generally; Contributions	A-19
3.2	Additional Contributions	A-20
3.3	Default in Making of Contributions	A-20
3.4	Capital Accounts	A-21
3.5	Additional Members	A-21
3.6	Member Capital	A-21
3.7	Liability of Members	A-21
3.8	Member Loans	A-21
3.9	Loans by Third Parties	A-22
3.10	Dilution	A-22
ARTICLE 4 DISTRIBUTIONS		A-22
4.1	Distributions of Cash Available for Distribution and Capital Proceeds	A-22
4.2	Distributions Upon Liquidation	A-23
4.3	Withholding	A-23
4.4	Distributions in Kind	A-23
4.5	Limitations on Distributions	A-23
ARTICLE 5 ALLOCATIONS OF NET PROFITS AND NET LOSSES		A-23
5.1	General Allocation of Net Profits and Losses	A-23
5.2	Regulatory Allocations	A-25
5.3	Tax Allocations	A-26
5.4	Other Provisions	A-27

A-3

ARTICLE 6 OPERATIONS		A-27
6.1	Management	A-27
6.2	Limitations on Authority of the Managing Member	A-29
6.3	Reimbursement and Remuneration	A-30
6.4	Reliance by Third Parties	A-30
6.5	Records and Reports; Fiscal Year	A-30
6.6	Indemnification and Liability	A-31
6.7	Other Activities	A-33
6.8	Anti-Competition	A-33
ARTICLE 7 INTERESTS AND TRANSFERS OF INTERESTS		A-34
7.1	Transfers and Withdrawals	A-34
7.2	Further Restrictions	A-36
7.3	Rights of Assignees	A-37
7.4	Admissions, Withdrawals and Removals	A-37
7.5	Admission of Assignees as Substitute Members.	A-38
7.6	Withdrawal of Members Upon Transfer	A-39
7.7	Conversion of Membership Interest	A-39
7.8	Option to Purchase by Renown	A-39
7.9	Buy/Sell by NHP/PMB	A-40
ARTICLE 8 DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY		A-41
8.1	Limitations	A-41
8.2	Exclusive Causes	A-41
8.3	Effect of Dissolution	A-42
8.4	No Capital Contribution Upon Dissolution	A-42
8.5	Liquidation	A-42
ARTICLE 9 MISCELLANEOUS		A-43
9.1	Amendments	A-43
9.2	Member Representations and Warranties	A-44
9.3	Entire Agreement	A-46
9.4	Further Assurances	A-46
9.5	Notices	A-47
9.6	Tax Matters	A-47
9.7	Governing Law	A-47
9.8	Construction	A-47
9.9	Captions - Pronouns	A-47
9.10	Binding Effect	A-48
9.11	Severability	A-48
9.12	Interpretation	A-48

A-4

9.13	No Third Party Beneficiaries	A-48
9.14	Counterparts	A-48
9.15	Mandatory Arbitration	A-48
9.16	Attorneys’ Fees	A-49
9.17	Injunctive Relief and Enforcement	A-49
9.18	Appointment of Managing Member as Attorney-in-Fact	A-49
9.19	Force Majeure	A-50
9.20	Limitation On Creditors’ Interests	A-50
9.21	No Liability For Return of Capital	A-50
9.22	Good Faith	A-50
9.23	Time of Essence	A-51
9.24	1031 Exchange Cooperation	A-51
9.25	REIT Restrictions	A-51

EXHIBITS:
Exhibit A	Members, Initial Capital Contributions, Capital Accounts and Percentage Interests
Exhibit B	Dilution of Defaulting Member’s Interest
Exhibit C	Fair Market Value Determination Procedures
Exhibit D	Interim Report Template
Exhibit E	Existing Competing Medical Office Buildings

A-5

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF THE TERRACE AT SOUTH MEADOWS, LLC

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) of THE TERRACE AT SOUTH MEADOWS, LLC (the “Company”) is made and entered into effective as of             , 2008 (the “Effective Date”), by and between NHP/PMB L.P., a Delaware limited partnership (“NHP/PMB”), and RENOWN BUSINESSES (formerly known as Washoe Professional Center, Inc.), a Nevada corporation (“Renown”) (together with NHP/PMB, the “Members,” with each being referred to, individually, as a “Member”) for the purpose of continuing the operation of the Company as a limited liability company organized in Delaware under the Delaware Limited Liability Company Act, 6 Del.C. § 18-101, et seq. (as the same may be amended from time to time, the “Act”).

RECITALS

A. On January 17, 2003, Renown and PMB South Meadows, LLC, a Nevada limited liability company (“PMB South Meadows”) formed The Terrace at South Meadows, LLC, a Nevada limited liability company, by filing Articles of Organization with the Secretary of State of the State of Nevada pursuant to Chapter 86 of the Nevada Revised Statutes, and on April     , 2003, entered into a First Amended and Restated Operating Agreement (the “Existing Operating Agreement”) for the purpose of amending and restating the Operating Agreement of The Terrace at South Meadows, LLC, a Nevada limited liability company.

B. On             , 2008, The Terrace at South Meadows, LLC, a Nevada limited liability company, was converted into the Company.

C. Following the conversion described in Recital B above, PMB South Meadows and Renown each held a fifty (50%) membership interest in the Company.

D. Pursuant to that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008 (as amended to date, and as the same may be further amended or modified from time to time in accordance with the terms thereof, the “Formation and Contribution Agreement”), by and among Nationwide Health Properties, Inc., NHP/PMB, Pacific Medical Buildings LLC (“Pac Med”), and certain partnerships or limited liability companies affiliated with Pac Med, PMB South Meadows has transferred and conveyed to NHP/PMB all of its right, title and interest in and to a fifty percent (50%) membership interest in the Company and NHP/PMB was admitted to the Company as a member and is hereby being appointed as the sole Managing Member (as defined below). As a result of such transaction, the Company is owned fifty percent (50%) by NHP/PMB and fifty percent (50%) by Renown.

E. In connection with the transactions consummated pursuant to the Formation and Contribution Agreement and the admission of NHP/PMB as a Member and its appointment as the sole Managing Member of the Company, the Members desire to adopt this Agreement in accordance with the Act and to amend and restate the Existing Operating Agreement as set forth herein.

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AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

ORGANIZATIONAL MATTERS

1.1 Continuation; Organization. The Members are continuing the Company under the Act for the purposes and upon the terms and conditions hereinafter set forth. The rights and liabilities of the Members of the Company shall be as provided in the Act, except as otherwise expressly provided herein. In the event of any inconsistency between any terms and conditions contained in this Agreement and any non-mandatory provisions of the Act, the terms and conditions contained in this Agreement shall govern.

1.2 Name. The name of the Company shall be The Terrace at South Meadows, LLC. The Company may also conduct business at the same time under one or more fictitious names if the Managing Member determines that such is in the best interests of the Company. The Managing Member may change the name of the Company, from time to time, in accordance with applicable law.

1.3 Principal Place of Business; Other Places of Business. The principal place of business of the Company is located at 610 Newport Center Drive, Suite 1150, Newport Beach, California 92660, or such other place or places as the Managing Member may from time to time designate. The Company may maintain offices and places of business at such other place or places as the Managing Member deems advisable.

1.4 Business Purpose. The Company purpose is to engage in any lawful activity for which a limited liability company may be organized under the Act. Without the Managing Member’s consent, however, the Company shall not engage in any business other than the following:

1.4.1 The business of acquiring, whether by purchase, ground lease, or otherwise, the Property (as defined below) and developing, managing, owning, leasing, exchanging, maintaining, operating and selling the Property, building a medical office building and related improvements on the Property, incurring debt, and related activities; and

1.4.2 Such other activities directly related to the above as may be necessary, advisable, or appropriate, in the Managing Member’s sole opinion, to further the business purposes set forth herein.

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1.5 Statutory Compliance.

1.5.1 The Certificate of [Conversion/Formation] (the “Certificate”) of the Company was previously filed by [PMB South Meadows], as the sole and managing member of the Company, as an “authorized person” within the meaning of the Act, in the Office of the Delaware Secretary of State as required by the Act. As of the Effective Date, the Managing Member or any Officer of the Company, as an “authorized person” within the meaning of the Act, is hereby authorized to execute, deliver and file an amendment in accordance with the Act as the Managing Member shall deem necessary or advisable.

1.5.2 The Company shall continuously maintain a registered office and a designated and duly qualified agent for service of process on the Company in the State of Delaware. Initially the agent for service of process shall be c/o Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. The agent may be changed from time to time as the Managing Member determines.

1.5.3 The Company shall qualify to do business in each jurisdiction where required to do so under the laws of such jurisdiction.

1.6 Term. The term of the Company commenced on the date that the Certificate was filed with the Office of the Delaware Secretary of State, and shall continue until terminated pursuant to this Agreement or by law.

1.7 Partnership Status for Income Tax Purposes. It is the intent of the Members that, as of the Effective Date, the Company shall be characterized as a “partnership” for federal and state income tax purposes. This characterization, solely for such tax purposes, does not create or imply a general partnership among the Members for state law or any other purpose.

ARTICLE 2

DEFINITIONS

2.1 Definitions. Capitalized words and phrases used and not otherwise defined in this Agreement shall have the following meanings:

“Acquiring Member” is defined in Section 7.2(b) hereof.

“Act” is defined in the Preamble.

“Additional Members” is defined in Section 3.5 hereof.

“Adjusted Capital Account” means, with respect to any Member, the balance, if any, in such Member’s Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:

(a) Add to such Capital Account the following items:

(i) The amount, if any, that such Member is obligated to contribute to the Company upon liquidation of such Member’s Interest; and

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(ii) The amount that such Member is obligated to restore or is deemed to be obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(b) Subtract from such Capital Account such Member’s share of the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Adjusted Capital Account as of the end of the relevant fiscal year.

“Affiliate” means, with reference to a specified Person, any Person which, directly or indirectly (including through one or more intermediaries), controls or is controlled by or is under common control with any other Person, including any Subsidiary of a Person. For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly (including through one or more intermediaries), of the power to direct or cause the direction of the management and policies of such Person, through the ownership or control of voting securities, partnership interests or other equity interests or otherwise.

“Agreed Value” is defined in Section 7.8 hereof.

“Agreement” is defined in the Preamble hereof, as it is amended from time to time.

“Assignee” means any Person (a) to whom a Member (or Assignee thereof) Transfers all or any part of its Interest in accordance with the terms of this Agreement, and (b) that has not been admitted to the Company as a Substitute Member pursuant to Section 7.5 of this Agreement.

“Business Day” means a day that is not a Saturday, Sunday or legal holiday. In the event that the date for the performance of any covenant or obligation under this Agreement shall fall on a Saturday, Sunday or legal holiday, the date for performance thereof shall be extended to the next Business Day.

“Buy/Sell Offer Notice” is defined in Section 7.9 hereof.

“Buy/Sell Price” is defined in Section 7.9 hereof.

“Capital Account” means the Capital Account maintained for each Member on the Company’s books and records in accordance with the following provisions:

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(a) To each Member’s Capital Account there shall be added (i) such Member’s Capital Contributions, (ii) such Member’s allocable share of Net Profits and any items in the nature of income or gain that are specially allocated to such Member pursuant to Article 5 hereof or other provisions of this Agreement, and (iii) the amount of any Company liabilities assumed by such Member or which are secured by any property distributed to such Member.

(b) From each Member’s Capital Account there shall be subtracted (i) the amount of (A) cash and (B) the Gross Asset Value of any Company Assets (other than cash) distributed to such Member (other than any payment of principal and/or interest to such Member pursuant to the terms of a loan made by the Member to the Company or any fees paid to a Member) pursuant to any provision of this Agreement, (ii) such Member’s allocable share of Net Losses and any other items in the nature of expenses or losses that are specially allocated to such Member pursuant to Article 5 or other provisions of this Agreement, and (iii) liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.

(c) In the event any Interest is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred Interest.

(d) In determining the amount of any liability for purposes of subparagraphs (a) and (b) above, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.

(e) The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied in a manner consistent with such Regulations. In the event that the Managing Member shall determine that it is prudent to modify the manner in which the Capital Accounts, or any additions or subtractions thereto, are computed in order to comply with such Regulations, the Managing Member may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Member pursuant to Article 8 hereof upon the dissolution of the Company. The Managing Member shall also make (i) any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) any appropriate modifications in the event that unanticipated events might otherwise cause this Agreement not to comply with Regulations Sections 1.704-1(b) and 1.704-2.

“Capital Contributions” means, with respect to any Member, the total amount of cash and the initial Gross Asset Value of property (other than cash) contributed to the capital of the Company by such Member, whether as an initial Capital Contribution or as an additional Capital Contribution.

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“Capital Proceeds” means the net proceeds derived by the Company as a result of a Capital Transaction determined as follows: (a) in the case of any borrowing or refinancing, the gross amount of proceeds resulting therefrom less (i) all Company Expenses incurred in connection with such borrowing or refinancing, (ii) any other costs, expenses or liabilities (including repayment of any indebtedness of the Company) paid or repaid with such proceeds and (iii) any amounts reasonably set aside for the restoration, increase, or creation of Reserves; (b) in the case of a sale, exchange or other disposition of any Company Asset (or interest therein), the gross amount of proceeds resulting therefrom less (i) all Company Expenses incurred in connection with such transaction, (ii) any other costs, expenses or liabilities (including repayment of any indebtedness of the Company) paid or repaid with such proceeds and (iii) any amounts reasonably set aside for the restoration, increase, or creation of Reserves; (c) in the case of any insurance or condemnation recovery on account of any Company Asset (or interest therein), the gross amount of proceeds resulting therefrom, less (i) all Company Expenses incurred in connection with such event, (ii) any other costs, expenses or liabilities (including repayment of any indebtedness of the Company) paid or repaid with such proceeds, and (iii) any amounts reasonably set aside for the restoration, increase, or creation of Reserves or for payment of any restoration of the applicable Company Assets relating to the event giving rise to such recovery; and (d) any revenue previously set aside from Capital Proceeds that are deemed available for Distribution by the Managing Member, including any decrease in any Reserves previously set aside from Capital Proceeds.

“Capital Transaction” means a transaction pursuant to which (a) the Company finances or refinances any Company Assets (or any interest therein), (b) all or any portion of any Company Assets is sold, condemned, exchanged or otherwise disposed of, (c) insurance proceeds or other damages in respect of any Company Assets are recovered by the Company, or (d) any other transaction that, in accordance with GAAP, is considered capital in nature.

“Cash Available for Distribution” means, for the immediately preceding calendar quarter or other accounting period designated by the Managing Member, the Net Operating Income for such period.

“Certificate” is defined in Section 1.5 hereof.

“Change in Control” means, with respect to any Person, the occurrence of any of the following: (a) the sale of all or substantially all of that Person’s assets, stock, membership or partnership interests or other equity interests; (b) the merger, reorganization, share exchange, recapitalization, restructuring or consolidation of that Person, other than a transaction that would result in the voting securities of that Person outstanding immediately prior thereto to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of that Person or such surviving entity outstanding immediately after such transaction; or (c) the acquisition by any “Person” or “Group” (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) not previously owning any beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of the issued and outstanding voting securities of that Person, of an aggregate of 40% or more of the beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of the issued and outstanding voting securities of that Person.

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“Change in Control Option Notice” is defined in Section 7.8 hereof.

“Code” means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law). Any reference herein to a specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of future law.

“Company” is defined in the Preamble hereof.

“Company Assets” means all direct and indirect interests in real and personal property owned by the Company from time to time, and shall include both tangible and intangible property (including cash) and the interests held by the Company in any Subsidiary.

“Company Expenses” means, for any period, the amount of expenses accrued or paid by or on behalf of the Company in the ordinary course of business during such period, including all cash expenses, such as insurance premiums, legal, accounting, and bookkeeping. Company Expenses shall include the actual cost of goods, materials, and administrative services (including reasonably allocated overhead expenses) used for or by the Company, whether incurred by the Managing Member, any Affiliate thereof, or any non-Affiliate in performing functions set forth in this Agreement reasonably requiring the use of such goods, materials, or administrative services (including reasonably allocated overhead expenses).

“Company Minimum Gain” has the meaning set forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d)(1) for the phrase “partnership minimum gain.”

“Defaulted Contribution” is defined in Section 3.3.1 hereof.

“Defaulted Contribution Amount” is defined in Section 3.3.1 hereof.

“Defaulting Member” is defined in Section 3.3.1 hereof.

“Depreciation” means, for each fiscal year or other period, an amount equal to the federal income tax depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Member.

“Dispute” is defined in Section 9.15 hereof.

“Distribution” means a distribution of cash or other property by the Company to a Person arising from that Person’s ownership of a Membership Interest or an Economic Interest.

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“Economic Interest” means a Person’s right to share in the Net Profits, Net Losses, or similar items of, and to receive Distributions from, the Company, but does not include any other rights of a Member including, without limitation, the right to vote or to participate in the management of the Company, or, except as specifically provided in this Agreement or required under the Act, any right to information concerning the business and affairs of the Company.

“Effective Date” is defined in the Preamble hereof.

“Existing Operating Agreement” is defined in the Recitals hereto.

“Fair Market Value” means the value of the particular asset or interest in question determined on the basis of an arm’s length transaction for cash between an informed and willing seller (under no compulsion to sell) and an informed and willing purchaser (under no compulsion to purchase), taking into account, among other things, the anticipated cash flow, taxable income and taxable loss attributable to the asset or interest in question determined in accordance with the procedures set forth in Exhibit C attached hereto.

“Formation and Contribution Agreement” is defined in the Recitals hereto.

“GAAP” means United States generally accepted accounting principles.

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

(a) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the mutual consent of the Managing Member and the contributing Member.

(b) The Gross Asset Values of all Company Assets immediately prior to the occurrence of any event described in subparagraph (i), subparagraph (ii), subparagraph (iii) or subparagraph (iv) below shall be adjusted to equal their respective gross fair market values, as determined by the Managing Member using such reasonable method of valuation as it may adopt, as of the following times:

(i) the acquisition of an additional Interest (other than in connection with the execution of this Agreement) by a new or existing Member in exchange for more than a de minimis Capital Contribution, if the Managing Member determines that such adjustment is necessary or appropriate to reflect the relative interests of the Members in the Company;

(ii) the Distribution by the Company to a Member of more than a de minimis amount of Company Assets as consideration for an Interest, if the Managing Member determines that such adjustment is necessary or appropriate to reflect the relative interests of the Members in the Company;

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(iii) in connection with the grant of an interest in the Company (other than a de minimis interest) as consideration for the performance of services to or for the benefit of the Company by an existing Member acting in a capacity as a Member of the Company or by a new Member acting in a capacity as a Member of the Company or in anticipation of being a member of the Company if the Managing Member reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company;

(iv) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); and

(v) at such other times as the Managing Member shall determine necessary or advisable in order to comply with Regulations Sections 1.704-1(b) and 1.704-2.

(c) The Gross Asset Value of any Company Asset distributed to a Member shall be the gross fair market value of such asset on the date of Distribution as determined by the Managing Member.

(d) The Gross Asset Values of Company Assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to the extent that an adjustment pursuant to subparagraph (b) above is made in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (d).

(e) If the Gross Asset Value of a Company Asset has been determined or adjusted pursuant to subparagraph (a), subparagraph (b) or subparagraph (d) above, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such Company Asset for purposes of computing Net Profits and Net Losses.

“Ground Lease” shall mean the Ground Lease entered into as of February 12, 2003 (as amended to date or as the same may hereafter be amended from time to time), between Washoe Professional Center, Inc. as landlord and The Terrace at South Meadows, LLC, as tenant.

“Incapacity” means, (a) as to any Member who is an individual, the death, total physical disability or entry by a court of competent jurisdiction adjudicating such Member incompetent to manage his or her person or his or her estate; (b) as to any Member that is a corporation or limited liability company, the filing of a certificate of dissolution, or its equivalent, for the corporation or limited liability company or the revocation of its charter; (c) as to any Member that is a partnership, the dissolution and commencement of winding up of the partnership; (d) as to any Member that is an estate, the distribution by the fiduciary of the estate’s

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entire interest in the Company; (e) as to any trustee of a trust that is a Member, the termination of the trust (but not the substitution of a new trustee); or (f) as to any Member, the bankruptcy of such Member. For purposes of this definition, bankruptcy of a Member shall be deemed to have occurred when (i) the Member commences a voluntary proceeding seeking liquidation, reorganization or other relief of or against such Member under any bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) the Member is adjudged as bankrupt or insolvent, or a final and non-appealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Member, (iii) the Member executes and delivers a general assignment for the benefit of the Member’s creditors, (iv) the Member files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in any proceeding of the nature described in clause (ii) above, (v) the Member seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Member or for all or any substantial part of the Member’s properties, (vi) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (vii) the appointment without the Member’s consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within ninety (90) days of such appointment, or (viii) an appointment referred to in clause (vii) above is not vacated within ninety (90) days after the expiration of any such stay.

“Indemnitee” is defined in Section 6.6.1 hereof.

“Interim Reporting Period” is defined in Section 6.5.5 hereof.

“Liabilities” is defined in Section 6.6.1 hereof.

“Liquidator” is defined in Section 8.5.1 hereof.

“Lists” is defined in Section 9.2.3 hereof.

“Majority of Non-Managing Members” means Members (or the applicable subset thereof) holding, in the aggregate, more than fifty percent (50%) of the Percentage Interests held by all Members other than the Managing Member (or the applicable subset thereof).

“Managing Member” means, initially, NHP/PMB and any other Person that succeeds to NHP/PMB as the “Managing Member” of the Company.

“Member Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i) with respect to “partner minimum gain.”

“Member Nonrecourse Debt” has the meaning set forth in Regulations Section 1.704-2(b)(4) for the phrase “partner nonrecourse debt.”

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“Member Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(i) for the phrase “partner nonrecourse deductions.”

“Members” means the Persons owning Membership Interests, any Substitute Members and any Additional Members, with each Member being referred to, individually, as a “Member.”

“Membership Interest” or “Interest” means the entire ownership interest of a Member in the Company at any particular time, including without limitation, the Member’s Economic Interest, any and all rights to vote and otherwise participate in the Company’s affairs, and the rights to any and all benefits to which a Member may be entitled as provided in this Agreement, together with the obligations of such Member to comply with all of the terms and provisions of this Agreement.

“M.O.B.” shall mean the three-story medical office building complex with a rentable area of approximately sixty thousand nine hundred and fifty-three (60,953) square feet previously constructed by Company located on the premises leased pursuant to the Ground Lease.

“Net Operating Income” means, for any period, the amount by which Operating Revenues exceed Company Expenses for such period.

“Net Profits” or “Net Losses” means, for each fiscal year or other period, an amount equal to the Company’s taxable income or loss for such year or period determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(a) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition of Net Profits and Net Losses shall be added to such taxable income or loss;

(b) Any expenditure of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition of Net Profits and Net Losses, shall be subtracted from such taxable income or loss;

(c) Gain or loss resulting from any disposition of Company Assets where such gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the Company Assets disposed of, notwithstanding that the adjusted tax basis of such Company Assets differs from its Gross Asset Value;

(d) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year;

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(e) To the extent an adjustment to the adjusted tax basis of any asset included in Company Assets pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts as a result of a Distribution other than in liquidation of a Member’s Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for the purposes of computing Net Profits and Net Losses;

(f) If the Gross Asset Value of any Company Asset is adjusted in accordance with paragraph (b) or paragraph (c) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account in the taxable year of such adjustment as gain or loss from the disposition of such asset for purposes of computing Net Profits or Net Losses; and

(g) Notwithstanding any other provision of this definition of Net Profits and Net Losses, any items that are specially allocated pursuant to the Regulatory Allocations or Section 5.4.2 hereof shall not be taken into account in computing Net Profits or Net Losses. The amounts of the items of Company income, gain, loss or deduction available to be specially allocated pursuant to the Regulatory Allocations and Section 5.4.2 hereof shall be determined by applying rules analogous to those set forth in this definition of Net Profits and Net Losses.

“NHP/PMB” is defined in the Preamble hereof.

“NHP/PMB’s Controlling Principal” means Nationwide Health Properties, Inc., a Maryland corporation, and its successors and assigns.

“Nonrecourse Deductions” has the meaning set forth in Regulations Sections 1.704-2(b)(1) and 1.704-2(c).

“Nonrecourse Liability” has the meaning set forth in Regulations Sections 1.704-2(b)(3) and 1.752-1(a)(2).

“OFAC” is defined in Section 9.2.3 hereof.

“Officers” is defined in Section 6.1.3 hereof.

“Operating Revenues” means, for any period, the gross revenues of the Company arising from the ownership and operation of the Company Assets during such period determined in accordance with GAAP, but specifically excluding Capital Proceeds and Capital Contributions made by the Members (provided that the amount of any decrease in Reserves previously included in determining Company Expenses for any period shall be included in Operating Revenues for the period in which such decrease occurs).

“Option Notice” is defined in Section 7.8 hereof.

“Option Purchase Price” is defined in Section 7.8 hereof.

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“Order” and “Orders” are defined in Section 9.2.3 hereof.

“Pac Med” is defined in the Recitals hereto.

“Percentage Interest” means, with respect to each Member, the percentage set forth opposite such Member’s name on Exhibit A attached hereto, as the same may be amended or otherwise modified from time to time.

“Person” means and includes an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated organization, a government or any department or agency thereof, or any entity similar to any of the foregoing.

“PMB, LLC” means PMB, LLC, a Delaware limited liability company, and its successors and assign.

“PMB South Meadows” is defined in the Recitals hereto.

“Property” means the premises leased by the Company pursuant to the Ground Lease, together with all right, title and interest of the Company as tenant under the Ground Lease, and all improvements thereon and rights related thereto, including the M.O.B.

“Property Manager” means the Person responsible for the day to day management of the M.O.B. and marketing of available space therein, including preparation of operating expense budgets therefor, and the maintenance, cleaning, care, security and safety of the M.O.B.

“Put Agreement” means that certain Put Agreement dated             , 2008, between NHP/PMB and PMB, LLC, pursuant to which NHP/PMB has the right to require that PMB, LLC purchase all of NHP/PMB’s Membership Interest in the Company upon and subject to the terms and conditions therein.

“Put Closing” means the date that (i) PMB, LLC (or its assignee) purchases all of NHP/PMB’s Membership Interest in the Company pursuant to the terms of the Put Agreement, (ii) NHP/PMB withdraws as a Member and as the Managing Member of the Company, and (iii) PMB, LLC (or its assignee) becomes a Substituted Member and the substituted Managing Member of the Company.

“Regulations” means temporary and final Treasury Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding Treasury Regulations).

“Regulatory Allocations” is defined in Section 5.2.8 hereof.

“Renown” is defined in the Preamble hereof, and its successor and assigns.

“Renown’s Controlling Principal” means Renown Health System, a Nevada not-for-profit corporation, and its successors and assigns.

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“Reserves” means funds set aside or amounts allocated to reserves that shall be maintained in amounts reasonably deemed sufficient by the Managing Member for working capital, and to pay taxes, insurance, debt service, and other liabilities, costs or expenses incident to the existence of the Company or the conduct of business by the Company as contemplated hereunder.

“Right of First Refusal” is defined in Section 7.1.2 hereof.

“Right to Compete” is defined in Section 6.7 hereof.

“ROFO Interest” is defined in Section 7.1.2 hereof.

“ROFO Offer Notice” is defined in Section 7.1.2 hereof.

“Securities Act” is defined in Section 9.2.2 hereof.

“Stated Value” is defined in Section 7.9 hereof.

“Subsidiary” means any Affiliate of the Company which is directly or indirectly, through one or more intermediaries, controlled by the Company.

“Substitute Member” means any Person (a) to whom a Member (or Assignee thereof) Transfers all or any part of its Interest, and (b) which has been admitted to the Company as a Substitute Member pursuant to Section 7.5 hereof.

“Tax Matters Partner” is defined in Section 9.6 hereof.

“Term Option Date” is defined in Section 7.8 hereof.

“Term Option Notice” is defined in Section 7.8 hereof.

“Transfer” means, with respect to any Interest in the Company or portion thereof, any assignment, conveyance, sale, pledge, hypothecation, encumbrance, transfer or other disposition of all or any part of such Interest.

“Transferred or “Transferring” shall have a correlative meaning to “Transfer.”

ARTICLE 3

MEMBER CAPITAL, CAPITAL ACCOUNTS, LOANS

AND LIABILITIES

3.1 Generally; Contributions.

3.1.1 The names, addresses and Percentage Interests of the Members as of the Effective Date are set forth on Exhibit A attached hereto and incorporated herein. All Members acknowledge and agree that on or before Effective Date, the Members have made the Capital Contributions described on Exhibit A attached hereto.

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3.1.2 The names, addresses, Capital Contributions (including additional Capital Contributions) and Percentage Interests of the Members shall at all times be set forth in the books and records of the Company and shall represent the amount of cash and the Gross Asset Value of all property (other than cash) contributed by or deemed to have been contributed by the Members. Such books and records shall be supplemented from time to time by the Managing Member to reflect the admission of Additional Members and Substitute Members pursuant to this Agreement, as well as to reflect any changes in the Members’ respective Capital Contributions and Percentage Interests pursuant to the terms of this Agreement.

3.2 Additional Contributions.

3.2.1 Except as set forth in this Section 3.2 hereof, or as otherwise required by law, no Member or Assignee shall be required to make any additional Capital Contributions to the Company.

3.2.2 As and when appropriate from time to time to satisfy the capital needs of the Company, the Managing Member shall determine if, when and to what extent additional equity contributions are necessary and shall require the Members to make additional Capital Contributions in accordance with this Section 3.2 hereof. If the Managing Member determines that any additional Capital Contributions are necessary in accordance with the foregoing, the Managing Member shall give written notice to each Member indicating each Member’s required amount thereof. In all events, the Members shall be obligated to make such additional Capital Contributions only in proportion to their then respective Percentage Interests.

3.2.3 Each Member shall have ten (10) calendar days from the date such notice is given to contribute to the Company its additional Capital Contributions in cash. The Managing Member shall cause the Company’s books and records to be updated to reflect such additional Capital Contributions and any corresponding changes to the Members’ Capital Account balances as a result thereof.

3.3 Default in Making of Contributions.

3.3.1 If any Member (in such capacity, a “Defaulting Member”) fails to timely make all or any portion of any initial or additional Capital Contribution such Member is required to make (the “Defaulted Contribution”), and such failure continues for a period of five (5) calendar days after receipt by such Defaulting Member of written notice from the other Member (the “Non-Defaulting Member”) specifying such failure, then the Non-Defaulting Member shall have the right, but not the obligation to make a replacement cash Capital Contribution to the Company in the amount of the Defaulted Contribution (the “Defaulted Contribution Amount”). In the case of a replacement Capital Contribution as described in this Section 3.3.1, only the contributing Member’s Capital Account will be credited with the Defaulted Contribution Amount so contributed by it, and in such event, all Percentage Interests shall thereupon be adjusted as provided in Exhibit B attached hereto.

3.3.2 The rights of the Company and the Non-Defaulting Member under Section 3.3.1 hereof shall be in addition to, and not exclusive of, any and all other rights and remedies available to the Company or the Non-Defaulting Member under this Agreement or

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otherwise at law or in equity (including, without limitation, instituting a legal proceeding to collect the amount of the Defaulted Contribution).

3.4 Capital Accounts. A Capital Account shall be established and maintained for each Member in accordance with the Regulations promulgated under Section 704 and the terms of this Agreement to the extent such terms are consistent with the applicable Regulations. Immediately prior to the amendment and restatement of this Agreement, the Capital Accounts of the Members were restated pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(f) and paragraph (b) of the definition of Gross Asset Value. Following that restatement, the Capital Accounts of the Members equaled the amounts set forth on Exhibit A attached hereto.

3.5 Additional Members. Subject to Section 6.2.1 hereof, the Managing Member is hereby authorized to issue new Interests directly from the Company and to admit one or more recipients of such Interests as additional Members (“Additional Members”) from time to time, on such terms and conditions and for such Capital Contributions as the Managing Member may determine, and the Percentage Interests of the existing Members shall thereupon be diluted in accordance with Section 3.10 hereof; provided, however, that any dilution of Renown’s Percentage Interest as a result thereof shall require the prior written consent of Renown, in its sole and absolute discretion. As a condition to being admitted to the Company, each Additional Member shall execute an agreement to be bound by the terms and conditions of this Agreement and such other documents as the Managing Member shall deem appropriate.

3.6 Member Capital. Except as otherwise provided in this Agreement or with the prior written consent of the Managing Member: (a) no Member shall demand or be entitled to receive a return of or interest on its Capital Contributions or Capital Account, (b) no Member shall withdraw any portion of its Capital Contributions or receive any Distributions from the Company as a return of capital on account of such Capital Contributions, and (c) the Company shall not redeem or repurchase the Interest of any Member.

3.7 Liability of Members. Except as otherwise required by any non-waivable provision of the Act or other applicable law: (a) no Member shall be personally liable in any manner whatsoever for any debt, liability or other obligation of the Company, whether such debt, liability or other obligation arises in contract, tort, or otherwise; and (b) no Member shall in any event have any liability whatsoever in excess of (i) the amount of its Capital Contributions, if any, (ii) its share of any assets and undistributed profits of the Company, (iii) the amount of any unconditional obligation of such Member to make additional Capital Contributions to the Company pursuant to this Agreement, and (iv) the amount of any wrongful Distribution to such Member, unless and to the extent such Member has actual knowledge (at the time of the Distribution) that such Distribution is made in violation of the Act.

3.8 Member Loans.

3.8.1 No Member shall be required to make any loans or otherwise lend any funds to the Company.

3.8.2 A Member may make loans to the Company or any Subsidiary of the Company with the consent of such Member and the Managing Member, provided that such loans

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are on commercially reasonable terms no less favorable to the Company than might be available from independent third parties as reasonably determined by the Managing Member, unless otherwise approved by a Majority of Non-Managing Members.

3.8.3 No loans made by any Member to the Company shall have any effect on such Member’s Percentage Interest, such loans representing a debt of the Company payable or collectible solely from the assets of the Company in accordance with the terms and conditions upon which such loans were made or, absent any such documents or instruments, shall be repaid prior to making any Distribution to the Members of the Company.

3.9 Loans by Third Parties. The Managing Member, in its sole and absolute discretion and from time to time, may cause the Company to borrow funds or enter into any similar credit, guarantee, financing or refinancing arrangements for any use consistent with the purpose of the Company from or with any Person, including from the Managing Member (provided that if such Person is a Member or any Affiliate thereof, the provisions of Section 3.8 hereof with respect to loans from Members shall apply) upon such terms as the Managing Member determines appropriate in its sole and absolute discretion, and to pledge or otherwise secure such borrowings or similar arrangements with any Company Assets.

3.10 Dilution.

3.10.1 Subject to Section 6.2.1 hereof, the Managing Member shall have the right at any time and from time to time, to designate an additional Percentage Interest to any new or existing Member in exchange for such consideration as the Managing Member may determine; provided that, subject to Section 3.3.1, all then-existing Percentage Interests shall be diluted pro rata in connection therewith.

3.10.2 All dilution under this Section 3.10 shall be effected without compensation to the Members from whom such Percentage Interests are taken, except as otherwise agreed in writing by the Managing Member and a Majority of Non-Managing Members.

ARTICLE 4

DISTRIBUTIONS

4.1 Distributions of Cash Available for Distribution and Capital Proceeds.

4.1.1 Generally. Except as otherwise provided in this Section 4.1 or in Section 4.2 and Article 8 hereof, no Member shall be entitled to receive Distributions from the Company.

4.1.2 Quarterly Distributions of Cash Available for Distribution. Except as otherwise provided in Section 4.2 and Article 8 hereof, the Managing Member shall cause the Company to distribute Cash Available for Distribution on a quarterly basis, in proportion to each Member’s Percentage Interest provided that such Distributions shall be made in accordance with the remainder of this Article 4.

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4.1.3 Distributions Upon Capital Transaction. Except as otherwise provided in Section 4.2 and Article 8 hereof, upon a Capital Transaction, the Managing Member shall cause all Capital Proceeds resulting therefrom to be distributed to the Members in proportion to each Member’s Percentage Interest, provided that such Distribution shall be made in accordance with the remainder of this Article 4.

4.2 Distributions Upon Liquidation. Notwithstanding the provisions of this Article 4, Distributions made in conjunction with the winding-up and final liquidation of the Company shall be applied or distributed as provided in Article 8 hereof.

4.3 Withholding. The Company may withhold Distributions or portions thereof if it is required to do so by any applicable rule, regulation, or law, and each Member hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local or foreign taxes that the Managing Member determines that the Company is required to withhold or pay with respect to any amount distributable or allocable to such Member pursuant to this Agreement. Any amount paid on behalf of or with respect to a Member pursuant to this Section 4.3 shall be treated as having been distributed to such Member in accordance with the terms of this Agreement. Each Member will furnish the Managing Member with such information as may be requested by the Managing Member from time to time to determine whether withholding is required, and each Member will promptly notify the Managing Member if such Member determines at any time that it is subject to withholding.

4.4 Distributions in Kind. No right is given to any Member to demand or receive property other than cash as provided in this Agreement. All distributions to the Members shall be in cash unless otherwise determined by the Managing Member and with the affirmative vote or written consent of a Majority of Non-Managing Members. Subject to the foregoing, any Company Assets distributed in a form other than cash shall be distributed in such a fashion as to ensure that the fair market value thereof is distributed and allocated in accordance with this Article 4 and Articles 5 and 8 hereof. The fair market value of any Company Assets distributed in kind shall be determined by the Managing Member and with the affirmative vote or written consent of a Majority of Non-Managing Members.

4.5 Limitations on Distributions. Notwithstanding any provision to the contrary contained in this Agreement, neither the Company nor the Managing Member, on behalf of the Company, shall be required to make a Distribution to any Person in violation of the Act or other applicable law.

ARTICLE 5

ALLOCATIONS OF NET PROFITS AND NET LOSSES

5.1 General Allocation of Net Profits and Losses.

5.1.1 Generally. Net Profits and Net Losses shall be determined and allocated with respect to each fiscal year or other period of the Company: (a) as of the end of such fiscal year, (b) at such times as the Gross Asset Value of any Company Asset is adjusted pursuant to the definition thereof, and (c) at such other times as may be required or permitted pursuant to this Agreement or otherwise under the Code. Subject to the other provisions of this Agreement, an

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allocation to a Member of a share of Net Profits or Net Losses shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Profits or Net Losses.

5.1.2 Interim Allocations. After giving effect to the allocations set forth in Section 5.2, Net Profits and Net Losses for any fiscal year or other period shall be allocated to each of the Members as follows:

(a) Net Profits. Net Profits shall be allocated as follows:

(i) First, to the Members in accordance with their Percentage Interests in an amount equal to the remainder, if any, of the cumulative Net Losses allocated to such Members pursuant to Section 5.1.2(b)(ii) hereof for all prior fiscal years minus the cumulative Net Profits allocated to such Member pursuant to this Section 5.1.2(a)(i) for all prior fiscal years;

(ii) Second, to the Members in proportion to and in an amount equal to the remainder, if any, of the cumulative Net Losses allocated to each such Member pursuant to Section 5.1.2(b)(i) for all prior fiscal years minus the cumulative Net Profits allocated to such Member pursuant to this Section 5.1.2(a)(ii) for all prior fiscal years; and

(iii) Third, to the Members in accordance with their Percentage Interests.

(b) Net Losses. Net Losses shall be allocated as follows:

(i) First, to the Members in proportion to, and in reverse order of, the Net Profits previously allocated to the Members in accordance with Section 5.1.2(a) hereof to the extent not already taken into account under this Section 5.1.2(b)(i); and

(ii) Second, to the Members in accordance with their Percentage Interests.

5.1.3 Adjustments. To the extent any allocation of Net Profits is made under Section 5.1.2(a)(i) or (ii), to the greatest extent possible, such income shall be of the same character as the Net Loss which is being offset.

5.1.4 Allocations in Connection with Liquidations. Notwithstanding the allocation provisions set forth in Sections 5.1.1 and 5.1.2 hereof, but subject to Section 5.2 hereof, all Net Profits or Net Losses realized in connection with the dissolution of the Company in accordance with Article 8 hereof shall be allocated to the Members in a manner so that the Distributions to each Member pursuant to Section 4.2 and Article 8 hereof shall, to the greatest extent possible, be equal to that amount that each such Member would receive under Section 4.1 hereof if the amounts to be distributed by the Company in connection with such dissolution were instead distributed under Section 4.1 hereof.

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5.2 Regulatory Allocations. Notwithstanding the foregoing provisions of this Article 5, the following special allocations shall be made in the following order of priority:

5.2.1 If there is a net decrease in Company Minimum Gain during a Company taxable year, then each Member shall be allocated items of Company income and gain for such taxable year (and, if necessary, for subsequent years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Regulations Section 1.704-2(g)(2). This Section 5.2.1 is intended to comply with the minimum gain chargeback requirement of Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

5.2.2 If there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during any Company taxable year, each Member who has a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such taxable year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in a manner consistent with the provisions of Regulations Section 1.704-2(g)(2). This Section 5.2.2 is intended to comply with the partner nonrecourse debt minimum gain chargeback requirement of Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

5.2.3 If any Member unexpectedly receives an adjustment, allocation, or Distribution of the type contemplated by Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of income and gain shall be allocated to all such Members (in proportion to the amounts of their respective Adjusted Capital Account Deficits) in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit of such Member as quickly as possible. It is intended that this Section 5.2.3 qualify and be construed as a “qualified income offset” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d).

5.2.4 If the allocation of Net Loss (or items of loss or deduction) to a Member as provided in Section 5.1 hereof would create or increase an Adjusted Capital Account Deficit, there shall be allocated to such Member only that amount of Net Loss as will not create or increase an Adjusted Capital Account Deficit. The Net Loss that would, absent the application of the preceding sentence, otherwise be allocated to such Member shall be allocated to the other Members in accordance with their relative Percentage Interests, subject to the limitations of this Section 5.2.4.

5.2.5 To the extent that an adjustment to the adjusted tax basis of any Company Asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a Distribution to a Member in complete liquidation of its Interest, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event that Regulations

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Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom such Distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

5.2.6 The Nonrecourse Deductions for each taxable year of the Company shall be allocated to the Members in accordance with their respective Percentage Interests.

5.2.7 The Member Nonrecourse Deductions shall be allocated each year to the Member that bears the economic risk of loss (within the meaning of Regulations Section 1.752-2) for the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable.

5.2.8 The allocations set forth in Sections 5.2.1, 5.2.2, 5.2.3, 5.2.4, 5.2.5, 5.2.6 and 5.2.7 hereof (the “Regulatory Allocations”) are intended to comply with certain requirements of Regulations Sections 1.704-1(b) and 1.704-2(i). Notwithstanding the provisions of Sections 5.1.2 and 5.1.3, the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Members so that, to the extent possible, the net amount of such allocations of other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred.

5.3 Tax Allocations.

5.3.1 Except as provided in Section 5.3.2 hereof, for income tax purposes under the Code and the Regulations each Company item of income, gain, loss and deduction shall be allocated between the Members as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to this Article 5.

5.3.2 Tax items with respect to Company Assets that are contributed to the Company on or before the Effective Date with a Gross Asset Value that varies from its basis in the hands of the contributing Member immediately preceding the date of contribution shall be allocated between the Members for income tax purposes pursuant to Regulations promulgated under Code Section 704(c) so as to take into account such variation. The Company shall account for such variation under the “traditional method,” without curative allocations, as described in Regulations Section 1.704-3(b). If the Gross Asset Value of any Company Asset is adjusted pursuant to the definition of “Gross Asset Value” in Section 2.1 hereof, or if assets are contributed to the Company after the Effective Date at a Gross Asset Value that differs from their tax bases, subsequent allocations of income, gain, loss and deduction with respect to any such Company Asset shall take account of any variation between the adjusted basis of such Company Asset for federal income tax purposes and its Gross Asset Value under any method approved under Code Section 704(c) and the applicable Regulations as chosen by the Managing Member. Allocations pursuant to this Section 5.3.2 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Profits, Net Losses and any other items or Distributions pursuant to any provision of this Agreement.

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5.4 Other Provisions.

5.4.1 For any fiscal year or other period during which any part of a Membership Interest or Economic Interest is transferred between the Members or to another Person, the portion of the Net Profits, Net Losses and other items of income, gain, loss, deduction and credit that are allocable with respect to such part of a Membership Interest or Economic Interest shall be apportioned between the transferor and the transferee under any method allowed pursuant to Section 706 of the Code and the applicable Regulations as determined by the Managing Member.

5.4.2 In the event that the Code or any Regulations require allocations of items of income, gain, loss, deduction or credit different from those set forth in this Article 5, the Managing Member is hereby authorized to make new allocations in reliance on the Code and such Regulations, and no such new allocation shall give rise to any claim or cause of action by any Member.

5.4.3 The Members acknowledge and are aware of the income tax consequences of the allocations made by this Article 5 and hereby agree to be bound by the provisions of this Article 5 in reporting their shares of Net Profits, Net Losses and other items of income, gain, loss, deduction and credit for federal, state and local income tax purposes.

5.4.4 For purposes of determining a Member’s proportional share of the Company’s “excess nonrecourse liabilities” within the meaning of Regulations Section 1.752-3(a)(3), each Member’s interest in Net Profits shall be such Member’s Percentage Interest.

5.4.5 All matters concerning the allocations and other determinations provided for in this Article 5 and any accounting procedures not expressly provided for in this Agreement shall be determined by the Managing Member in a manner consistent with the terms and intent of this Agreement.

ARTICLE 6

OPERATIONS

6.1 Management.

6.1.1 Except as otherwise expressly provided in this Agreement, the Managing Member shall have sole and complete charge and management of all the affairs and business of the Company, in all respects and in all matters and shall have full, exclusive and complete discretion to manage and control the business and affairs of the Company, to make all decisions affecting the business and affairs of the Company and to take all such actions as it deems necessary or appropriate to accomplish the purposes and direct the affairs of the Company.

6.1.2 Except as otherwise provided in this Agreement, the Managing Member shall have the sole power and authority to bind the Company, except and to the extent that such power is expressly delegated in writing to any other Person by the Managing Member (including, without limitation, through the appointment of officers of the Company).

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6.1.3 The Managing Member may appoint one or more individuals to manage the day-to-day business affairs of the Company (the “Officers”). The Officers shall serve at the pleasure of the Managing Member. To the extent delegated by the Managing Member, the Officers shall have the authority to act on behalf of, bind and execute and deliver documents in the name and on behalf of the Company. Unless otherwise specified by the Managing Member, such Officers shall have such authority and responsibility in respect of the Company as is generally attributable to the holders of such offices in corporations incorporated under the laws of the State of Delaware. In addition, the Managing Member may designate such other Persons to act as agents of the Company’s business as the Managing Member shall determine in its sole and absolute discretion, and the actions of such other Persons taken in such capacity and in accordance with this Agreement shall bind the Company to the same extent the Managing Member is authorized to bind the Company.

6.1.4 Except as otherwise expressly provided in this Agreement or as the Managing Member may delegate, the Members shall not participate in the management of the Company, and shall have no right, power or authority to act for or on behalf of, or otherwise bind, the Company. Except as expressly provided in this Agreement or required by any non-waivable provisions of applicable law, Members (other than the Managing Member) shall have no right to vote on or consent to any other matter, act, decision, or document involving the Company or its business. No Member (other than the Managing Member) shall take any action in the name of or on behalf of the Company, including, without limitation, assuming any obligation or responsibility on behalf of the Company, unless such action, and the taking thereof by such Member, shall have been expressly authorized by the Managing Member or shall be expressly and specifically authorized by this Agreement.

6.1.5 Without limiting the generality of the foregoing provisions of this Section 6.1, in furtherance of the Company’s purpose as set forth in Section 1.4 hereof, the Managing Member (on behalf of the Company) shall have full and complete power and authority, without the approval of any Member (except as otherwise specifically provided herein):

(a) to take all actions necessary to fulfill the Company’s purpose set forth in Section 1.4;

(b) to negotiate, enter into, perform, modify, extend, terminate, amend, waive, renegotiate, and/or carry out any contracts and agreements of any kind and nature, including, without limitation, contracts and agreements with any Person, including any Member or Assignee, or any Affiliate thereof (provided that any contract or agreement with any Member or Affiliate of a Member shall be on commercially reasonable terms no less favorable to the Company than might be available from independent third parties as reasonably determined by the Managing Member, unless otherwise approved by a Majority of Non-Managing Members), or any other agent of the Company, as the Managing Member deems necessary or advisable;

(c) to, from time to time, employ, engage, hire, or otherwise secure the services of such Persons, including any Member or any Affiliate thereof (provided that any such engagement or employment of a Member or Affiliate of a Member shall be

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approved by the other Member, with such consent not to be unreasonably withheld), as the Managing Member may deem necessary or advisable for the administration of the business of the Company;

(d) to exercise any and all rights on behalf of the Company;

(e) to acquire, hold, sell, lease, exchange and otherwise deal with the Company’s Assets or any interests therein;

(f) to make Distributions of Company Assets;

(g) to borrow or lend money on behalf of the Company for any general purpose of the Company; and

(h) to control all other aspects of the business and operations of the Company that the Managing Member elects to so control.

6.2 Limitations on Authority of the Managing Member.

6.2.1 General Limitations. The Managing Member shall not have authority hereunder to cause the Company to engage in the following transactions without first obtaining the affirmative vote or written consent of a Majority of Non-Managing Members in their sole and absolute discretion: (a) pledge any of the Company’s credit or Company Assets for other than Company purposes; (b) assign the Company’s Assets in contravention of this Agreement; (c) confess judgment against the Company; (d) commit any wrongful act making it impossible to carry on the Company’s ordinary business; (e) sell or transfer the Property or all or substantially all of the Company Assets (provided, however, that in the event NHP/PMB, as Managing Member, seeks the affirmative vote or written consent of a Majority of Non-Managing Members, and such affirmative vote or written consent is not provided within thirty (30) days, NHP/PMB shall be permitted to Transfer all of its Membership Interest to PMB, LLC in accordance with Section 7.1.3(d) hereof, provided that such Transfer shall be subject to the Right of First Refusal in accordance with Section 7.1.2 hereof); (f) merge the Company with any other Person (including a reorganization, acquisition, or similar transaction); or (g) admit any Additional Members (to the extent that their admission would dilute Renown’s Percentage Interest or result in NHP/PMB no longer being the Managing Member), except in accordance with Section 7.1.3 hereof.

6.2.2 Approval of Property Manager. Notwithstanding anything to the contrary in this Agreement, for so long as Renown is a Member of the Company, the Managing Member shall cause the M.O.B. to be managed by a Property Manager approved by Renown, which approval shall not be unreasonably withheld, conditioned or delayed. Renown hereby approves of PMB Real Estate Services, LLC, the Managing Member or any Affiliate of the Managing Member as the Property Manager of the M.O.B. (provided that any contract or agreement with PMB Real Estate Services, LLC, the Managing Member or any Affiliate of the Managing Member shall be on commercially reasonable terms no less favorable to the Company than might be available from independent third parties as reasonably determined by the Managing Member).

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6.3 Reimbursement and Remuneration. The Managing Member shall not be compensated for acting in such capacity, but shall be entitled to reimbursement for reasonable expenses including the Managing Member’s reasonably allocated overhead expenses incurred in furtherance of the business or management of the Company. Distributions received by the Members pursuant to Articles 4 and 8 are not, and shall not be deemed to be, remuneration within the meaning of this Section 6.3.

6.4 Reliance by Third Parties. Any Person dealing with the Company or the Managing Member may rely upon a certificate signed by the Managing Member (or any one or more of its agents designated by the Managing Member for such purpose or given such authority) as to:

6.4.1 The identity of the Managing Member, any Member of the Company or any Officer;

6.4.2 The existence or non-existence of any facts which constitute a condition precedent to acts by the Managing Member or in any other manner germane to the affairs of the Company;

6.4.3 The Persons who are authorized to execute and deliver any instrument or document for or on behalf of the Company; or

6.4.4 Any act or failure to act by the Company or as to any other matter whatsoever involving the Company or any Member.

6.5 Records and Reports; Fiscal Year.

6.5.1 The Managing Member shall cause to be kept (and made available to each Member), at the principal place of business of the Company, or at such other location as the Managing Member shall reasonably deem appropriate, full and proper ledgers, other books of account, and records of all receipts and disbursements, other financial activities, and the internal affairs of the Company for at least the current and past four fiscal years.

6.5.2 The Members agree that the books of the Company shall be kept for accounting purposes in accordance with GAAP, consistently applied, and shall be kept for tax reporting purposes in accordance with applicable provisions of the Code. Subject to Code Section 448, the books of the Company may be kept on such other methods of accounting for tax and financial reporting purposes as may be determined by the Managing Member. The fiscal year of the Company shall end on December 31 of each year.

6.5.3 Members (personally or through an authorized representative) may, for purposes reasonably related to their Interests, examine and copy (at their own cost and expense) the books and records of the Company at all reasonable business hours.

6.5.4 Prior to December 15 of each year, the Managing Member shall deliver to the other Members, for informational purposes only and not for approval, a copy of the annual budget approved by the Managing Member for the Property for the following calendar year.

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6.5.5 Notwithstanding that the fiscal year of the Company shall end on December 31 of each year, for so long as Renown is a Member of the Company, the Managing Member shall have prepared and delivered to Renown an interim report of the Company’s operations for the period from July 1 of each year through June 30 of the following year (the “Interim Reporting Period”) in the form attached hereto as Exhibit D (or such other form as the Managing Member and Renown may reasonably agree) in order to permit Renown to report on the operations of the Company for each Interim Reporting Period. Such interim report shall be delivered to Renown no later than forty-five (45) days after the end of each Interim Reporting Period.

6.6 Indemnification and Liability.

6.6.1 The Company shall indemnify and hold harmless the Managing Member, each of the Members and all officers and agents of the Company (each an “Indemnitee”) to the full extent permitted by law from and against any and all losses, claims, demands, costs, damages, liabilities, expenses of any nature (including attorneys’ fees and disbursements and other costs of litigation, whether pending or threatened), judgments, fines, settlements and other amounts, of any nature whatsoever, known or unknown, liquid or illiquid (collectively, “Liabilities”) arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which the Indemnitee may be involved, or threatened to be involved as a party or otherwise, arising out of or incident to the business of the Company, if (a) the Indemnitee acted in good faith in a manner such Person believed to be within the scope of such Indemnitee’s authority and in, or not contrary to, the best interests of the Company, and (b) the Indemnitee’s conduct did not constitute fraud, bad faith or willful misconduct. The termination of an action, suit, or proceeding by judgment, order, settlement, or upon a plea of nolo contendre or its equivalent, shall not, in and of itself, create a presumption or otherwise constitute evidence that the Indemnitee acted in a manner contrary to that specified in clauses (a) or (b) above. For purposes of this Section 6.6, reasonable reliance upon the advice of legal counsel shall raise a rebuttable presumption of “good faith.” Notwithstanding anything to the contrary herein, the foregoing indemnity shall not extend to any Liabilities arising from a Member’s breach of its representations, warranties, covenants or acknowledgements in Section 9.2 hereof.

6.6.2 Expenses incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding subject to this Section 6.6 shall be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of a satisfactory written commitment by or on behalf of the Indemnitee to repay such amount if it shall be determined that such Indemnitee is not entitled to be indemnified as authorized in this Section 6.6.

6.6.3 The indemnification provided by this Section 6.6 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, as a matter of law or equity or otherwise, and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.

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6.6.4 Any indemnification provided hereunder shall be satisfied solely out of the Company Assets. No Member shall be subject to personal liability by reason of these indemnification provisions.

6.6.5 No Indemnitee shall be denied indemnification in whole or in part under this Section 6.6 by reason of the fact that the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

6.6.6 Except as set forth in Section 6.6.3 hereof, the provisions of this Section 6.6 are for the benefit of the Indemnitees only and shall not be deemed to create any rights for the benefit of any other Person.

6.6.7 None of the Officers of the Company, the Managing Member or any Member (except as provided in Section 9.2.4(b) hereof) shall be liable to the Company or to any other Member for any losses sustained or liabilities incurred as a result of any act or omission of such Person if (i) such Person acted in good faith in a manner such Person believed to be within the scope of such Person’s authority and in, or not contrary to, the best interests of the Company, and (ii) such Person’s conduct did not constitute fraud, bad faith, willful misconduct or a material breach of this Agreement.

6.6.8 The Managing Member is hereby authorized on behalf of the Company to cause the Company to indemnify, hold harmless and release any agents and/or advisors of the Company, the Managing Member and the Company’s Affiliates, to the same extent provided with respect to the Indemnitees in this Section 6.6.

6.6.9 To the extent that, at law or in equity, the Members have duties (including fiduciary duties) and liabilities relating thereto to the Company, any Member or other Person bound by the terms of this Agreement, such Members acting in good faith in accordance with this Agreement shall not be liable to the Company, any other Member, or any such other Person for their good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they expand or restrict the duties and liabilities of a Member otherwise existing at law or in equity, are agreed by all parties hereto to modify to that extent such other duties and liabilities to the greatest extent permitted under applicable law.

6.6.10 Each Member shall have a duty to act in good faith. Subject to the foregoing sentence, but notwithstanding anything else in this Agreement to the contrary or otherwise applicable law, whenever a Member or the Members are required or permitted to make a decision, take or approve an action, or omit to do any of the foregoing: (a) “in its discretion,” under a similar grant of authority or latitude, or without an express standard of behavior (including, without limitation, standards such as “reasonable”), then each Member shall be entitled to consider only such interests and factors, including its own, as it desires, and shall, to the fullest extent permitted by law, have no duty or obligation to consider any other interests or factors whatsoever (other than the duty to act in good faith), or (b) with an express standard of behavior (including, without limitation, standards such as “reasonable”), then each Member shall comply with such express standard but shall not be subject to any other, different or additional standard (other than the standard of good faith).

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6.7 Other Activities. Except as provided in Section 6.8 hereof, each Member and its Affiliates may engage or invest in, and devote its and their time to, any other business venture or activity of any nature and description, whether or not such activities are considered competitive with the Company (the “Right to Compete”), and neither the Company nor any other Member shall have any right by virtue of this Agreement or the relationship created hereby in or to such other venture or activity of any Member (or to the income or proceeds derived therefrom), and the pursuit of such other venture or activity shall not be deemed wrongful or improper. The Right to Compete of each Member and its Affiliates does not require the notice to, approval from, or other sharing with, any of the other Members or the Company. The legal doctrines of “corporate opportunity,” “business opportunity” and similar doctrines shall not be applied to any such competitive venture or activity of a Member or its Affiliates. No Member or its Affiliates shall have any obligation to the Company or its other Members with respect to any opportunity.

6.8 Anti-Competition. Notwithstanding anything to the contrary in Section 6.7 hereof, or any other provision of this Agreement to the contrary, Renown and NHP/PMB agree as follows:

6.8.1 Renown. Renown covenants and agrees with NHP/PMB that, so long as Renown or any Affiliate of Renown is a Member of the Company, neither Renown nor any Affiliate of Renown shall engage in the construction or operation of other new medical office buildings that might be in competition with the M.O.B. within a three (3) mile radius of the M.O.B. while the occupancy of the M.O.B. is below ninety-five percent (95%) without the prior written consent of NHP/PMB, which consent may be given or withheld in NHP/PMB’s sole and absolute discretion. At such time as either (i) the M.O.B. first achieves at least a ninety-five percent (95%) occupancy or (ii) Renown or any Affiliate of Renown is no longer a Member of the Company, this restriction shall terminate and be of no further force or effect, even if, with respect to such occupancy, the occupancy later drops below the ninety five percent (95%) level. The restriction in this Section 6.8.1 shall not apply to any existing medical office buildings or properties owned, leased or operated by Renown or any of its Affiliates described on Exhibit E attached hereto.

6.8.2 NHP/PMB. NHP/PMB covenants and agrees with Renown that, so long as NHP/PMB or any Affiliate of NHP/PMB is a Member of the Company, neither NHP/PMB nor any Affiliate of NHP/PMB shall engage in the construction or operation of other new medical office buildings that might be in competition with the M.O.B. within a three (3) mile radius of the M.O.B. without the prior written consent of Renown, which consent may be given or withheld in Renown’s sole and absolute discretion. At such time as neither NHP/PMB nor any Affiliate of NHP/PMB is a Member of the Company, this restriction shall terminate and be of no further force or effect. The restriction in this Section 6.8.2 shall not apply to any existing medical office buildings owned, leased or operated by NHP/PMB or any of its Affiliates described on Exhibit E attached hereto.

6.8.3 Medical Office Building Defined. As used in this Section 6.8, “medical office building” shall mean a building, the primary use of which is for the private practice of medicine and related services by medical, osteopathic, podiatric doctors and/or related health care professionals, and uses related or incidental thereto (including parking), and “Medical

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Office Building” shall expressly not include any senior housing, assisted living or other similar facility.

ARTICLE 7

INTERESTS AND TRANSFERS OF INTERESTS

7.1 Transfers and Withdrawals.

7.1.1 Generally. To the fullest extent permitted by law, and except as otherwise permitted in this Article 7, no Member nor any Assignees or Substitute Member may (a) Transfer all or any portion of its Membership Interest or Economic Interest (or beneficial interest therein) to any Person voluntarily or permit such a Transfer by operation of law, (b) withdraw from the Company, or (c) take any action causing the dissolution of the Company prior to its termination pursuant to the terms hereof, without, in each case, the consent of the Managing Member, or, if the Managing Member is the Transferring Member, without the consent of a Majority of the Non-Managing Members, which consent, in either such case, may be given or withheld in each such Member’s sole and absolute discretion. To the fullest extent permitted by law, any purported Transfer which is not in strict compliance with this Agreement shall be void ab initio.

As a condition to the effectiveness of any Transfer that is permitted under this Section 7.1, the transferor shall bear and pay all related fees and costs including any Company Expenses. Any Transfer permitted under this Section 7.1 shall also be subject to the provisions of Section 7.2 hereof. Except as otherwise expressly provided in this Article 7, the recipient or transferee of any Membership Interest or Economic Interest (or any part thereof or beneficial interest therein) Transferred (or deemed Transferred) in accordance with this Article 7 shall be an Assignee only, with only the rights provided in Section 7.3, unless and until admitted as a Substitute Member pursuant to Section 7.5 hereof.

7.1.2 First Refusal Right. Except as provided in Section 7.1.3 hereof, if, at anytime a Member shall desire to Transfer all or any portion of its Membership Interest or Economic Interest (or any part thereof or beneficial interest therein), including by NHP/PMB pursuant to the exercise of its rights under the Put Agreement (such offered interest being hereinafter referred to as the “ROFO Interest”), it shall first offer the ROFO Interest to the other Members in accordance with this Section 7.1.2 (the “Right of First Refusal”). In such event, the Transferring Member shall first deliver to the other Members a written notice (the “ROFO Offer Notice”) stating (a) the exact interest to be Transferred as the ROFO Interest, (b) the name of the proposed Assignee, (c) the purchase price, and (d) the terms for payment; provided, however, that if NHP/PMB shall exercise its rights under the Put Agreement, then the ROFO Offer Notice to be delivered to the other Members shall be a written notice of NHP/PMB’s exercise of its rights under the Put Agreement, together with the purchase price to be paid by PMB, LLC (or its assignee) thereunder. Within fifteen (15) days after receipt of the ROFO Offer Notice, any one (1) or more of the other Members may, at their option, exercisable in writing by an irrevocable notice, elect to purchase the ROFO Interest for the purchase price and on the terms set forth in the ROFO Offer Notice, which purchase shall be consummated within forty-five (45) days of the delivery of the notice of such election (or such earlier or later date as the Members may agree). The closing of such a purchase shall be held at the principal office of the Company and the owner of the ROFO Interest being sold shall transfer such interest free and

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clear of all liens, security interests and competing claims and shall deliver such instruments of transfer and such evidence of due authorization, execution and delivery and of the absence of any such liens, security interests or competing claims as the purchaser hereunder shall reasonably request. If more than one Member elects to purchase the offered ROFO Interest pursuant to the Right of First Refusal, the right to purchase such ROFO Interest shall be apportioned to such electing Members in proportion to their Percentage Interests, or in such different proportions as may be agreed on by them in writing, provided that all of the ROFO Interest offered pursuant to the ROFO Offer Notice must be purchased. All the Members who exercise the Right of First Refusal hereunder, shall only be severally liable for the purchase price in the proportion of their purchase; provided, however, that should any Member fail to purchase their agreed upon or designated share of the offered ROFO Interest, the other electing Members shall purchase their prorata portion of such ROFO Interest (so that the entire ROFO Interest is purchased).

If none of the other Members elect to purchase the ROFO Interest pursuant to the Right of First Refusal provided in this Section 7.1.2, then the Transferring Member may Transfer the Membership Interest or Economic Interest being offered to the proposed Assignee in the ROFO Offer Notice to such Assignee. Nevertheless, except as otherwise provided in Section 7.1.3 hereof, the Assignee shall become a Substituted Member only with the consent of the Managing Member, or, if the Managing Member is the Transferring Member, with the consent of a Majority of the Non-Managing Members, which consent, in either such case, may be given or withheld in each such Member’s sole and absolute discretion. In the event that NHP/PMB, as Managing Member, seeks the consent of a Majority of Non-Managing Members under the preceding sentence with respect to an Assignee other than PMB, LLC, and such consent is not provided within thirty (30) days, NHP/PMB shall be permitted to Transfer all of its Membership Interest to PMB, LLC in accordance with Section 7.1.3(d) hereof (provided that if NHP/PMB’s entire Membership Interest is greater than the ROFO Interest previously offered, then such Transfer of NHP/PMB’s entire Membership Interest shall first be subject to another Right of First Refusal in accordance with the terms of this Section 7.1.2).

7.1.3 Permitted Transfers. Notwithstanding anything to the contrary herein, the following Transfers may be consummated (x) without the consent or approval of any other Member and (y) except as provided in subsection (d) below, without first complying with the Right of First Refusal pursuant to Section 7.1.2 hereof, and the Assignee shall become a Substituted Member with respect to any Membership Interest so Transferred (subject only to the condition set forth in Section 7.5.1(c) hereof):

(a) Between Members. Any Member may Transfer all or any part of its Membership Interest or Economic Interest (or beneficial interest therein) in the Company to any other Member on terms and conditions agreed upon by such Members.

(b) Affiliate Transfers. Any Member may Transfer all or any portion of its Membership Interest or Economic Interest (or beneficial interest therein) in the Company to an Affiliate (in each case, for so long as such Affiliate remains an Affiliate of such transferor). Except as otherwise provided herein, if any such Member (or Assignee thereof) Transfers all or any portion of its Membership Interest or Economic Interest (or beneficial interest therein) to an Affiliate and such Affiliate ceases to be an Affiliate of the transferor at any time thereafter, then such transferor and such transferee

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shall be in material breach of this Agreement and such event shall be deemed a Transfer in violation of the restrictions set forth in Section 7.1.1 hereof.

(c) Transfers for Estate Planning. Any Member may Transfer all or any portion of its Membership Interest or Economic Interest (or beneficial interest therein) in the Company to a family member of such Member, a trust of which all the beneficiaries are such Member or family members of such Member, to a corporation, general or limited partnership or limited liability company all of the owners of which are such Member or family members of such Member.

(d) Put Closing. NHP/PMB may, subject to first complying with the Right of First Refusal provisions of Section 7.1.2 hereof, Transfer its Membership Interest in the Company to PMB, LLC (or its assignee) in connection with a Put Closing, in which case PMB, LLC (or its assignee) shall become not only a Substitute Member, but shall, notwithstanding anything to the contrary in Section 7.5.1(c) hereof, also replace NHP/PMB as the Managing Member of the Company.

7.1.4 Allocations and Adjustments Upon Transfer. In the event of a Transfer of all or any Membership Interest or Economic Interest in the Company in accordance with this Agreement, at any time other than at the end of the Company’s fiscal year, the profits, gains, losses, deductions and credits of the Company for such fiscal year shall be allocated between or among the respective parties or the Members, as the case may be, in such manner as determined by the Managing Member which is consistent with the provisions of Code Section 706(d) or any applicable successor thereto.

7.1.5 No Mortgages, Pledges and Hypothecations. Without limiting the provisions of Section 7.1.1 hereof, and notwithstanding the other provisions of this Section 7.1, no Member may mortgage, pledge or hypothecate its Interest in the Company without the approval of the Managing Member, or, if the Managing Member is the Member desiring to mortgage, pledge or hypothecate its Interest, without the consent of a Majority of the Non-Managing Members, which consent, in either such case, may be given or withheld in each such Member’s sole and absolute discretion.

7.2 Further Restrictions. Notwithstanding any contrary provision in this Agreement, unless approved by the Managing Member and a Majority of Non-Managing Members, in each case in their sole and absolute discretion, any otherwise permitted Transfer to any Person shall be null and void if:

(a) such Transfer may cause a termination of the Company for federal or state, if applicable, income tax purposes (unless otherwise waived in writing by the Managing Member and a Majority of Non-Managing Members);

(b) such Transfer may cause the Company to cease to be classified as a partnership for federal or state income tax purposes, provided, however, that if as a result of such Transfer one Member (for purposes of this Section 7.2(b), the “Acquiring Member”) would own one hundred percent (100%) of the outstanding Interests, and following such Transfer the Company would constitute a disregarded

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entity for United States federal income tax purposes with respect to the Acquiring Member, such Transfer shall be a permitted Transfer;

(c) such Transfer may require the registration of such Transferred Interests pursuant to any applicable federal or state securities laws;

(d) such Transfer may cause the Company to become a “Publicly Traded Partnership,” as such term is defined in Sections 469(k)(2) or 7704(b) of the Code;

(e) such Transfer would cause the Company to violate the “private placement” safe harbor of Section 1.7704-1(h) of the Regulations;

(f) such Transfer may subject the Company to regulation under the Investment Company Act of 1940, the Investment Advisers Act of 1940 or the Employee Retirement Income Security Act of 1974, each as amended;

(g) such Transfer may result in a violation of applicable laws;

(h) such Transfer is made to any Person who lacks the legal right, power or capacity to own such Interest; or

(i) the Company does not receive written instruments (including, without limitation, copies of any instruments of Transfer and such Substitute Member’s or Assignee’s consent to be bound by this Agreement as appropriate) that are in a form satisfactory to the Managing Member (in its reasonable discretion).

7.3 Rights of Assignees. Until such time, if any, as the transferee in any permitted Transfer pursuant to this Article 7 is admitted to the Company as a Substitute Member pursuant to Section 7.5: (a) such transferee shall be an Assignee only, and only shall receive, to the extent Transferred, the Distributions and allocations of income, gain, loss, deduction, credit, or similar items to which the Member that Transferred its Interest would be entitled, and (b) such Assignee shall not be entitled or enabled to exercise any other rights or powers of a Member, such other rights remaining with the transferring Member. In such a case, the transferring Member shall remain a Member, and shall remain liable for the satisfaction of all obligations contained herein as a Member, even if he has Transferred his entire Economic Interest to one or more Assignees. In the event any Assignee desires to make a further assignment of any Economic Interest, such Assignee shall be subject to all of the provisions of this Agreement relating to restrictions on Transfer to the same extent as any Member desiring to make such an assignment.

7.4 Admissions, Withdrawals and Removals. Except as otherwise specifically set forth in this Agreement, no Person shall be admitted to the Company as a Member except in accordance with Sections 3.5 and 3.10 hereof (and subject to the restrictions set forth in Section 6.2.1 hereof) (in the case of Persons obtaining an Interest directly from the Company) or Sections 7.1.3 and 7.5 hereof (in the case of transferees of a permitted Transfer of an Interest from another Person). Except as otherwise specifically set forth in this Agreement, no Member shall be entitled to retire or withdraw from being a Member of the Company except (i) in accordance with Section 7.6 hereof, or (ii) with the consent of the Managing Member, or, if the

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Managing Member is the withdrawing Member, with the consent of a Majority of the Non-Managing Members, which consent, in either such case, may be given or withheld in each such Member’s sole and absolute discretion. No Member shall be subject to removal in the Company as a Member. No admission, withdrawal or removal of a Member shall cause the dissolution of the Company. Any purported admission, withdrawal or removal which is not in accordance with this Agreement shall be null and void.

7.5 Admission of Assignees as Substitute Members.

7.5.1 Except as otherwise provided in Section 7.1.3 hereof, an Assignee shall become a Substitute Member only if and when each of the following conditions are satisfied:

(a) The assignor of the Interest Transferred sends written notice to the Managing Member, or if the Managing Member is the Transferring Member, to the other Members, requesting the admission of the Assignee as a Substitute Member and setting forth the name and address of the Assignee, the Capital Account transferred, the Percentage Interest transferred, and the effective date of the Transfer; provided, however, that in connection with a Transfer by the Managing Member of its entire Membership Interest to PMB, LLC (or its assignee) in connection with a Put Closing, such notice shall be for informational purposes only;

(b) The Managing Member consents in writing to the admission of such Assignee as a Substitute Member, or if the Managing Member is the Transferring Member, a Majority of the Non-Managing Members consent in writing to the admission of such Assignee as a Substitute Member; provided, however, that the Managing Member may Transfer its entire Membership Interest to PMB, LLC (or its assignee) in connection with a Put Closing without the consent of a Majority of the Non-Managing Members, and in such event PMB, LLC (or its assignee) shall be admitted as a Substitute Member and appointed the Managing Member of the Company;

(c) The Managing Member receives from the Assignee (i) such information concerning the Assignee’s financial capacities and investment experience as the Managing Member may reasonably request, and (ii) written instruments (including, without limitation, copies of any instruments of Transfer and such Assignee’s consent to be bound by this Agreement as a Substitute Member) that are in a form satisfactory to the Managing Member (as determined in the Managing Member’s reasonable discretion); provided, however, that if the Managing Member is the Transferring Member, the other Members shall receive (except with respect to PMB, LLC (or its assignee)) from such Assignee (A) such information concerning the Assignee’s financial capacities and investment experience as a Majority of the Non-Managing Members may reasonably request, and (B) written instruments (including, without limitation, copies of any instruments of Transfer and such Assignee’s consent to be bound by this Agreement as a Substitute Member) that are in a form satisfactory to a Majority of the Non-Managing Members (as determined in a Majority of the Non-Managing Members’ reasonable discretion).

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7.5.2 Upon the admission of any Substitute Member, the books and records of the Company shall be updated by the Managing Member to reflect the name, address, Capital Contributions and Percentage Interest of such Substitute Member and to eliminate or adjust, if necessary, the name, address, Capital Contributions and Percentage Interest of the predecessor of such Substitute Member.

7.6 Withdrawal of Members Upon Transfer. If a Member has transferred all of its Membership Interest to one or more Assignees, then such Member shall withdraw from the Company if and when all such Assignees have been admitted as Substitute Members in accordance with this Agreement.

7.7 Conversion of Membership Interest. Upon the Incapacity of a Member, such Incapacitated Member’s Membership Interest shall automatically be converted to an Economic Interest only, and such Incapacitated Member (or its executor, administrator, trustee, or receiver, as applicable) shall thereafter be deemed an Assignee for all purposes hereunder, with the same Economic Interest as was held by such Incapacitated Member prior to its Incapacity, but without any other rights of a Member unless the holder of such Economic Interest is admitted as a Substitute Member pursuant to Section 7.5 hereof.

7.8 Option to Purchase by Renown. Renown shall have the option to purchase (a) NHP/PMB’s entire Membership Interest upon a Change in Control of NHP/PMB or NHP/PMB’s Controlling Principal or (b) the Managing Member’s entire Membership Interest (whether owned by NHP/PMB or a successor or assign to NHP/PMB) upon or at the conclusion of the five (5), ten (10), fifteen (15) and twenty (20) year anniversaries of the Effective Date (each, a “Term Option Date”). In the event of a Change in Control of NHP/PMB or NHP/PMB’s Controlling Principal, NHP/PMB shall deliver written notice of such event to Renown on or before the fifth (5^th) Business Day following such event, and Renown may exercise its option to purchase NHP/PMB’s entire Membership Interest pursuant to clause (a) above, if at all, by delivering a written irrevocable notice (a “Change in Control Option Notice”) to NHP/PMB of such exercise within one hundred twenty (120) days following Renown’s receipt of NHP/PMB’s written notice of such Change in Control, which Change in Control Option Notice shall also specify a closing date not later than ninety (90) days following the date on which such Change of Control Option Notice is delivered. If Renown is entitled to exercise the option to purchase pursuant to clause (b) above, such option shall be exercised, if at all, by delivering a written irrevocable notice (a “Term Option Notice,” and together with a Change of Control Option Notice, each an “Option Notice”) to the Managing Member at least six (6) months before the applicable Term Option Date, and the closing date therefor shall occur on the Term Option Date. If such option to purchase is exercised by Renown, the purchase price payable by Renown for such Membership Interest on the closing date shall be the Option Purchase Price.

As used herein, “Option Purchase Price” shall mean the amount that NHP/PMB would receive if, as of the date of the Option Notice, the Company Assets were sold at the Agreed Value, and the Company had immediately paid all Company debts and liabilities and distributed the net proceeds of the sale and any other liquid assets of the Company among the Members in accordance with the provisions of Section 8.5.1 hereof (without regard to any other costs of liquidation or the establishment of Reserves); provided, however, that if any prepayment penalties or loan assumption fees or costs become due with respect to the financing or other

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indebtedness as a result of transactions contemplated by this Section 7.8, such costs and fees shall be borne solely by Renown and shall be deducted from Renown’s distributions pursuant to Section 8.5.1 hereof prior to such calculation. As used herein, the term “Agreed Value” shall mean the Fair Market Value of the Company Assets as of the date of the Option Notice; provided, however, that the “Agreed Value” for the first (1^st) Term Option Date (i.e., the option upon or at the conclusion of the fifth (5^th) anniversary of the Effective Date), shall be the greater of (i) the Fair Market Value of the Company Assets as of the date of the Option Notice with respect thereto or (ii) $ [INSERT CONTRIBUTION VALUE FROM CONTRIBUTION AGREEMENT].

The closing of a purchase pursuant to this Section 7.8 shall be held at the principal office of the Company on the applicable closing date. At such closing, NHP/PMB (or the then owner of NHP/PMB’s Membership Interests) shall transfer to Renown the entire Membership Interest in the Company of NHP/PMB (or its successor or assign) free and clear of all liens, security interests and competing claims and shall deliver to Renown such instruments of transfer and such evidence of due authorization, execution and delivery and of the absence of any such liens, security interests or competing claims as Renown shall reasonably request. All other rights of NHP/PMB (or the then owner of NHP/PMB’s Membership Interests) in the Company shall be deemed terminated. Renown shall pay the Option Purchase Price to NHP/PMB (or its successor or assign) at the closing in cash.

7.9 Buy/Sell by NHP/PMB. In the event of a Change in Control of Renown or Renown’s Controlling Parent, Renown shall deliver written notice of such event to NHP/PMB on or before the fifth (5^th) Business Day following such event. NHP/PMB may initiate the buy/sell procedure set forth in this Section 7.9 by delivering, within one hundred twenty (120) days following NHP/PMB’s receipt of written notice of a Change in Control of Renown or Renown’s Controlling Principal, a written irrevocable offer (the “Buy/Sell Offer Notice”) to either (a) purchase the entire Membership Interest of Renown in the Company or (b) sell the entire Membership Interest of NHP/PMB in the Company to Renown on such terms and conditions as NHP/PMB shall set forth in the Buy/Sell Offer Notice. NHP/PMB shall in the Buy/Sell Offer Notice state a value for the Company Assets as of the date of such Buy/Sell Offer Notice (the “Stated Value”). The purchase price to be paid by NHP/PMB for Renown’s Membership Interest in the Company or by Renown for NHP/PMB’s Membership Interest in the Company pursuant to this Section 7.9 shall equal the Buy/Sell Price.

In the event that NHP/PMB shall deliver a Buy/Sell Offer Notice to Renown, Renown shall have a period of ninety (90) days after the date on which such Buy/Sell Offer Notice is delivered to either (i) accept the offer contained in the Buy/Sell Offer Notice or (ii) reject such offer, which rejection shall be deemed to constitute an irrevocable counter-offer. Failure of Renown to give written notice to NHP/PMB rejecting NHP/PMB’s offer within said 90-day period shall be deemed to be an acceptance of NHP/PMB’s offer by Renown. If NHP/PMB’s offer is an offer to sell to Renown, and Renown rejects such offer within the time period herein provided, then such rejection by Renown shall constitute an irrevocable counter-offer of Renown to sell Renown’s entire Membership Interest in the Company to NHP/PMB on the terms and conditions set forth in the Buy/Sell Offer Notice. Likewise, if NHP/PMB’s offer is an offer to buy from Renown then such rejection by Renown shall constitute an irrevocable counter-offer of

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Renown to purchase NHP/PMB’s entire Membership Interest in the Company on the terms and conditions set forth in the Buy/Sell Offer Notice.

The closing of a purchase pursuant to this Section 7.9 shall be held at the principal office of the Company on the one hundred twentieth (120th) day after the date on which the Buy/Sell Offer Notice is delivered. The selling Member shall transfer to the buying Member the entire Membership Interest in the Company of the selling Member free and clear of all liens, security interests and competing claims and shall deliver to the buying Member such instruments of transfer and such evidence of due authorization, execution and delivery and of the absence of any such liens, security interests or competing claims as the buying Member shall reasonably request. All other rights of the selling Member(s) in the Company shall be deemed terminated. The buying Member shall pay the Buy/Sell Price for the selling Member’s Membership Interest at the closing in accordance with the terms and conditions set forth in the Buy/Sell Offer Notice.

As used herein, “Buy/Sell Price” shall mean the amount that the selling Member would receive if, as of the date of the Buy/Sell Offer Notice, the Company Assets were sold at the Stated Value, and the Company had immediately paid all Company debts and liabilities and distributed the net proceeds of the sale and any other liquid assets of the Company among the Members in accordance with the provisions of Section 8.5.1 hereof (without regard to any other costs of liquidation or the establishment of Reserves); provided, however, that if any prepayment penalties or loan assumption fees or costs become due with respect to the financing or other indebtedness as a result of transactions contemplated by this Section 7.9, such costs and fees shall be borne solely by the buying Member and shall be deducted from such buying Member’s distributions pursuant to Section 8.5.1 hereof prior to such calculation.

ARTICLE 8

DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY

8.1 Limitations. The Company may be dissolved, liquidated, and terminated only pursuant to the provisions of this Article 8, and the parties hereto do hereby irrevocably waive any and all other rights they may have to cause a dissolution of the Company or a sale or partition of any or all of the Company Assets.

8.2 Exclusive Causes. Notwithstanding the Act, the following and only the following events shall cause the Company to be dissolved, liquidated, and terminated:

(a) The election of the Managing Member, with the affirmative vote or written consent of a Majority of Non-Managing Members;

(b) Judicial dissolution;

(c) At any time that there are no Members, unless the business of the Company is continued in accordance with the Act;

(d) Cancellation or termination of the Ground Lease entered into between Renown and the Company, unless such cancellation or termination results from the Company acquiring fee title to the Property;

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(e) The sale, exchange, or other disposition of all or substantially all of the Company Assets and the distribution to the Members of the proceeds of such sales, exchanges, or other dispositions;

(f) If (i) this Agreement is found to be illegal or (ii) it is reasonably determined by the Internal Revenue Service or Renown in good faith consultation with its independent certified public accountants that the continuation of this Agreement would likely jeopardize the tax-exempt status of Renown’s Controlling Principal or any of the other tax exempt Affiliates of Renown’s Controlling Principal; provided, however, that if the event potentially resulting in dissolution results from the jeopardization of Renown’s tax-exempt status as described in clause (ii) of this Section 8.2(f), then the dissolution shall not occur until: (A) first, Renown shall have the option to transfer its Membership Interest to an Affiliate pursuant to 7.1.3(b) hereof, or (B) if Renown declines to exercise its option to Transfer its Membership Interest to an Affiliate, the Managing Member shall have the right to initiate the buy/sell procedures set forth in Section 7.9 hereof. If neither Renown nor the Managing Member desires to exercise the rights provided above, the Company shall be dissolved.

To the fullest extent permitted by law, any dissolution of the Company other than as provided in this Section 8.2 shall be a dissolution in contravention of this Agreement.

8.3 Effect of Dissolution. The dissolution of the Company shall be effective on the day on which the event occurs giving rise to the dissolution, but the Company shall not terminate until (a) it has been wound up and its assets have been distributed as provided in Section 8.5 hereof and (b) a certificate of cancellation has been filed with the office of the Secretary of State of the State of Delaware. Notwithstanding the dissolution of the Company, prior to the termination of the Company, the business of the Company and the affairs of the Members, as such, shall continue to be governed by this Agreement.

8.4 No Capital Contribution Upon Dissolution. Each Member shall look solely to the assets of the Company for all Distributions with respect to the Company, its Capital Contributions thereto, its Capital Account and its share of Net Profits or Net Losses, and shall have no recourse therefor (upon dissolution or otherwise) against any other Member. Accordingly, if any Member has a deficit balance in its Capital Account (after giving effect to all contributions, Distributions and allocations for all taxable years, including the year during which the liquidation occurs), then such Member shall have no obligation to make any Capital Contribution with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other person for any purpose whatsoever.

8.5 Liquidation.

8.5.1 Upon dissolution of the Company, the Company shall thereafter engage in no further business other than that which is necessary to wind up the business, and the Managing Member (or such other Person as the Managing Member may determine) shall act as the “Liquidator” of the Company. A reasonable time shall be allowed for the winding up of the affairs of the Company in order to minimize any losses attendant upon such a winding up. In the event the Liquidator reasonably believes that it is prudent to do so, cash or other assets held in

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reserve may be placed in a liquidating trust or other escrow immediately prior to the termination of the Company in order to ensure that any and all obligations of the Company are satisfied. After allocating (pursuant to Article 5 hereof) all income, gain, loss, deductions and credit resulting from the liquidation of the Company Assets, the Liquidator shall apply and distribute the cash proceeds thereof as follows:

(a) First, to the creditors of the Company (including, without limitation, to Members who are creditors to the extent permitted by law) in satisfaction of liabilities of the Company, and to the setting up of any Reserves for contingencies which the Liquidator may consider necessary or appropriate;

(b) Thereafter, to the Members in accordance with their respective positive Capital Account balances determined in accordance with Section 8.5.2 hereof, by the end of the taxable year in which such liquidation occurs or, if later, within 90 days after the date of the liquidation.

8.5.2 The Capital Account balances shall be determined after taking into account all Capital Account adjustments for the accounting period during which such liquidation occurs (other than those made as a result of the Distributions set forth in Section 8.5.1(b) hereof).

8.5.3 Notwithstanding Section 8.5.1 or Section 8.5.2 hereof, in the event that the Liquidator determines that an immediate sale of all or any portion of the Company Assets would cause undue loss to the Members, the Liquidator, in order to avoid such loss to the extent not then prohibited by the Act, may either defer liquidation of and withhold from Distribution for a reasonable time any Company Assets except those necessary to satisfy, including the provision of reasonable Reserves for, the Company’s debts and obligations, or distribute the Company Assets to the Members in kind in a manner otherwise in accordance with the Distribution procedure of Section 8.5.1 hereof.

ARTICLE 9

MISCELLANEOUS

9.1 Amendments.

9.1.1 Each Substitute Member shall become a signatory hereto by signing a counterpart signature page to this Agreement, and such other instruments, in such manner, as the Managing Member shall determine. By so signing, each Substitute Member shall be deemed to have adopted and to have agreed to be bound by all of the provisions of this Agreement.

9.1.2 In addition to amendments specifically authorized herein, amendments may be made to this Agreement from time to time by the Managing Member, without the consent of any other Member: (a) to delete or add any provision of this Agreement required to be so deleted or added by any federal or state law, rule or regulation (provided that any such amendment may not adversely affect the Economic Interest or other material rights of any Member without such Member’s consent); (b) to take such actions as may be necessary (if any) to insure that the Company will be treated as a partnership for federal income tax purposes (provided that any such amendment may not adversely affect the Economic Interest of any

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Member without such Member’s consent); and (c) to reflect the admission of any Additional Member pursuant to Section 3.5 hereof or Substitute Member pursuant to Section 7.5 hereof.

9.1.3 In making any amendments, there shall be prepared and filed by, or for, the Managing Member such documents and certificates as may be required under the Act and under the laws of any other jurisdiction applicable to the Company.

9.2 Member Representations and Warranties. Each Member (solely on behalf of itself and not with respect to any other Member) hereby represents, warrants, covenants and acknowledges as follows:

9.2.1 Generally.

(a) Status. Such Member is duly incorporated, organized or formed (in the event such Member is not a corporation), validly existing and in good standing under the laws of its state or country of incorporation, organization or formation (as the case may be). Such Member has the requisite power and authority to own its property and to carry on its business as now conducted, to the extent material to its rights and obligations under this Agreement.

(b) Authority. Such Member has the requisite power and authority to execute and deliver this Agreement and to carry out its obligations hereunder in accordance with the terms and provisions hereof. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all requisite action, corporate or otherwise, on the part of such Member. This Agreement constitutes the legally valid and binding obligation of such Member, enforceable against it in accordance with its terms, except as enforceability may be affected by (i) the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors; (ii) the effect of general principles of equity and the limitation of certain remedies by certain equitable principles of general applicability; and (iii) the fact that the rights to indemnification hereunder may be limited by federal or state securities laws.

(c) No Breach or Default. The execution, delivery and performance by such Member of this Agreement and the transactions contemplated hereby will not constitute a material breach of any term or provision of, or a material default under (i) any outstanding indenture, mortgage, loan agreement or other similar contract or agreement to which such Member or any of its Affiliates is a party or by which it or any of its Affiliates or its or their property is bound; (ii) its certificate or articles of incorporation or bylaws or other governing documents; (iii) any material applicable law, rule or regulation; or (iv) any material order, writ, judgment or decree having applicability to it.

(d) Consents and Approvals. All material consents, licenses, approvals and authorizations, if any, and all material filings and registrations, required from any governmental body, authority, bureau or agency for or on the part of such Member or

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any of its Affiliates in connection with its execution and delivery of this Agreement and its contributions to the capital of the Company have been obtained on or prior to the date hereof.

9.2.2 Investment Representations.

(a) Such Member is acquiring its Interest for its own account and not for the account of any other Person. Such Member is acquiring its Interest solely for investment and not with a view to, or for resale in connection with, the distribution or other disposition thereof. Such Member understands that the sale and issuance of the Interests has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), applicable state securities laws or the securities or similar laws of any other jurisdiction whatsoever, and, therefore, the Interests cannot be sold, resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the securities and similar laws of each applicable jurisdiction, or unless exemptions from such registration requirements are available. Such Member understands that dispositions of its Interest can be made only (i) as explicitly permitted or contemplated under the terms of this Agreement and (ii) in compliance with the Securities Act and the rules and regulations of the Securities and Exchange Commission promulgated thereunder and all applicable state securities and “blue sky” laws; and such Member understands that the Company is under no obligation to register the offer or sale of any Interests in any jurisdiction whatsoever or to assist Members in complying with any exemption from registration under the securities or similar laws of any jurisdiction whatsoever.

(b) Such Member understands that it may bear the economic risk of an investment in an Interest for an indefinite period of time, and such Member’s financial situation is such that it can afford to bear the economic risk of holding its Interest for an indefinite period of time and suffer a complete loss of its investment in the Company.

(c) Such Member’s investment in the Company represented by its Interest is highly speculative in nature and is subject to a high degree of risk of loss in whole or in part. The amount of such investment is within such Member’s risk capital means and is not so great in relation to such Member’s total financial resources as would jeopardize the financial needs of such Member in the event such investment were lost in whole or in part.

(d) Such Member’s knowledge and experience in financial and business matters are such that it is capable of evaluating the merits and risks of its purchase and acquisition of its Interest, or it has been advised by representatives possessing such knowledge and experience.

(e) Such Member is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under the Securities Act.

9.2.3 Patriot Act. Such Member, and to such Member’s knowledge, all persons or entities holding any legal or beneficial interest whatsoever in such Member, are in compliance

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with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the “Order”) and other similar requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders or regulations in respect thereof (the Order and such other rules, regulations, legislation or orders are collectively called the (“Orders”)). To such Member’s knowledge, neither such Member nor any of its Affiliates (i) is listed on the Specially Designated Nationals and Blocked Person List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “Lists”), (ii) is a Person (as defined in the Order) who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or (iii) is owned or controlled by (including without limitation by virtue of such Person being a director or owning voting shares or interests), or acts for or on behalf of, any person on the Lists or any other Person who has been determined by competent authority to be subject to the prohibitions contained in the Orders.

9.2.4 Other

(a) Neither the Company nor the other Members have made any warranties or representations to such Member with respect to the income tax consequences of the transactions contemplated by this Agreement, and such Member is in no manner relying on the Company, any other Member or their respective representatives for an assessment of such tax consequences.

(b) Such Member agrees to indemnify, defend and hold harmless the Company, the other Members, each officer, director, agent and Affiliate of the Company and the other Members, and each other Person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act, against any and all losses, claims, demands, costs, damages, liabilities (joint and several), expenses of any nature (including reasonable attorneys’ fees and disbursements and other costs of litigation, whether pending or threatened), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, in which such Person may be involved, or threatened to be involved as a party or otherwise, arising out of or based upon any false representation or warranty made by such Member herein or in any other document or certificate delivered to the Company by such Member in connection with such Member’s acquisition of its Interest, or any breach or failure by such Member to comply with any covenant or agreement made by such Member herein.

9.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and thereof and fully supersedes any and all prior or contemporaneous agreements or understandings between the parties hereto pertaining to the subject matter hereof and thereof.

9.4 Further Assurances. Each of the parties hereto does hereby covenant and agree on behalf of itself, its successors, and its assigns, without further consideration, to prepare, execute, acknowledge, file, record, publish, and deliver such other instruments, documents and

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statements, and to take such other action as may be required by law or reasonably necessary to effectively carry out the purposes of this Agreement.

9.5 Notices. Any notice, consent, approval, demand or other communication required or permitted to be given hereunder (a “notice”) must be in writing and may be served personally or by U.S. Mail. If served by U.S. Mail, it shall be addressed to the recipient at that recipient’s address set forth on Exhibit A attached hereto. Any notice which is personally served shall be effective upon the date of service; any notice given by U.S. Mail shall be deemed effectively given, if deposited in the United States Mail, registered or certified with return receipt requested, postage prepaid and addressed as provided above, on the date of receipt, refusal or non-delivery indicated on the return receipt. In lieu of notice by U.S. Mail, either party may send notices by facsimile to the number specified for the recipient on Exhibit A attached hereto or by a nationally recognized overnight courier service which provides written proof of delivery (such as U.P.S. or Federal Express). Any notice sent by facsimile shall be effective upon confirmation of receipt in legible form, provided that an original of such facsimile is also sent to the intended addressee by another method approved in this Section 9.5, and any notice sent by a nationally recognized overnight courier shall be effective on the date of delivery to the party at its address specified on Exhibit A attached hereto set forth in the courier’s delivery receipt. Either party may, by notice to the other from time to time in the manner herein provided, specify a different address or facsimile number for notice purposes.

9.6 Tax Matters.

9.6.1 The Managing Member shall be designated and shall serve as “Tax Matters Partner” (as defined in Code Section 6231), to oversee or handle matters relating to the taxation of the Company.

9.6.2 The Member designated as “Tax Matters Partner” may make all elections for federal income and all other tax purposes (including, without limitation, pursuant to Section 754 of the Code) in accordance with this Agreement.

9.6.3 Income tax returns of the Company shall be prepared by such certified public accountants as the Managing Member shall retain at the expense of the Company.

9.7 Governing Law. This Agreement, including its existence, validity, construction, and operating effect, and the rights of each of the parties hereto, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to otherwise governing principles of choice of law or conflicts of law.

9.8 Construction. The Members intend that this Agreement shall be construed as if all parties prepared this Agreement.

9.9 Captions - Pronouns. Any titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the text of this Agreement. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as appropriate.

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9.10 Binding Effect. Except as otherwise expressly provided herein, this Agreement shall be binding on and inure to the benefit of the Members, their heirs, executors, administrators, successors and all other Persons hereafter holding, having or receiving a Membership Interest or Economic Interest, whether as Assignees, Substitute Members or otherwise.

9.11 Severability. In the event that any provision of this Agreement as applied to any party or to any circumstance, shall be adjudged by a court to be void, unenforceable or inoperative as a matter of law, then the same shall in no way affect any other provision in this Agreement, the application of such provision in any other circumstance or with respect to any other party, or the validity or enforceability of the Agreement as a whole.

9.12 Interpretation. All references herein to Articles, Sections, subparagraphs, Exhibits and addenda shall be deemed to be references to Articles, Sections and subparagraphs of, and Exhibits and addenda to, this Agreement unless the context shall otherwise require. All Exhibits and addenda attached hereto shall be deemed incorporated herein as if set forth in full herein. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.” The words “date hereof” shall refer to the date set forth on the cover page of this Agreement. All accounting terms not defined in this Agreement shall have the meanings determined by GAAP as in effect from time to time. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise expressly provided herein, any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.

9.13 No Third Party Beneficiaries. None of the provisions of this Agreement shall be for the benefit of or be enforceable by any creditor of the Company or by any creditor of any Member. This Agreement is not intended to confer any rights or remedies hereunder upon, and shall not be enforceable by, any Person other than the parties hereto and, solely with respect to the provisions of Sections 6.6 and 9.2.4(b) hereof, each Indemnitee and each other indemnified Person addressed therein.

9.14 Counterparts. This Agreement may be executed in any number of multiple counterparts, each of which shall be deemed to be an original copy and all of which shall constitute one agreement, binding on all parties hereto. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

9.15 Mandatory Arbitration. Any controversy, dispute, or claim of any nature arising out of, in connection with, or in relation to the interpretation, performance, enforcement or breach of this Agreement, including any claim based on contract, tort or statute (collectively, a

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“Dispute”), that cannot be resolved by the Members within thirty (30) days shall first be submitted to mediation between the Members. In the event that such mediation does not resolve the Dispute within ten (10) Business Days, the Dispute shall be resolved at the written request of any Member by binding arbitration using applicable arbitration procedures of JAMS located in Orange County, California pursuant to Delaware law. The Members shall attempt to designate one arbitrator from JAMS. If they are unable to do so within thirty (30) days after written demand therefor, then JAMS shall designate an arbitrator. The arbitration shall be final and binding, and enforceable in any court of competent jurisdiction. The arbitrator shall award attorneys’ fees (including those of in-house counsel) and costs to the prevailing Member and charge the cost of arbitration to any Member which is not the prevailing party. Notwithstanding anything to the contrary contained herein, this Section 9.15 shall not prevent a Member from seeking and obtaining equitable relief on a temporary or permanent basis, including, without limitation, a temporary restraining order, a preliminary or permanent injunction or similar equitable relief, from a court of competent jurisdiction located in the state of California (to which all Members consent to venue and jurisdiction) by instituting a legal action or other court proceeding in order to protect or enforce the rights of such Member under this Agreement or to prevent irreparable harm and injury. The court’s jurisdiction over any such equitable matter, however, shall be expressly limited only to the temporary, preliminary, or permanent equitable relief sought; all other claims initiated under this Agreement between the parties hereto shall be determined through final and binding arbitration in accordance with the terms of this Section 9.15. Neither the Members nor the arbitrator shall disclose the existence, content or results of any arbitration hereunder without the prior written consent of all Members except to the extent necessary to enforce the award; provided, however, that either Member may disclose the existence, content or results of any such arbitration to its partners, officers, directors, employees, agents, attorneys and accountants and to any other Person to whom disclosure is required by applicable law, including pursuant to an order of a court of competent jurisdiction. Each Member’s obligation under this Section 9.15 will survive the dissolution, liquidation and winding up of the Company.

9.16 Attorneys’ Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement or to resolve any dispute under this Agreement, the losing party shall pay the attorneys’ fees, costs and necessary disbursements of the prevailing party in addition to any other relief to which such prevailing party may be entitled.

9.17 Injunctive Relief and Enforcement. In the event of a breach by a Member of the terms of this Agreement, the Company or the other Members shall be entitled to institute, in accordance with Section 9.15 hereof, legal proceedings to obtain damages for any such breach, or to enforce the specific performance of this Agreement by such Member and to enjoin such Member from any further violation of this Agreement and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law. Each Member acknowledges that money damages for any breach by such Member of the provisions of this Agreement would not be a sufficient remedy for any breach of this Agreement by such Member and that in addition to all other remedies the Company and the non-breaching Members shall be entitled to specific performance and injunctive or other equitable relief for any such breach.

9.18 Appointment of Managing Member as Attorney-in-Fact.

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9.18.1 Each Member, including each Additional Member and Substitute Member, by its execution of this Agreement, irrevocably constitutes and appoints the Managing Member as its true and lawful attorney-in-fact with full power and authority in its name, place, and stead to execute, acknowledge, deliver, swear to, file, and record at the appropriate public offices such certificates and other instruments, and all amendments thereto, which the Managing Member deems appropriate to form, qualify or continue the Company as a limited liability company (or other entity in which the Members will have limited liability comparable to that provided in the Act), in the jurisdictions in which the Company may conduct business or in which such formation, qualification, or continuation is, in the opinion of the Managing Member, necessary or desirable to protect the limited liability of the Members or operate the Company.

9.18.2 The appointment by all Members of the Managing Member as attorney-in-fact shall be deemed to be a power coupled with an interest, in recognition of the fact that each of the Members under this Agreement will be relying upon the power of the Managing Member to act as contemplated by this Agreement in any filing and other action by it on behalf of the Company, shall survive the Incapacity of any Person hereby giving such power, and the transfer or assignment of all or any portion of the Interest of such Person in the Company, and shall not be affected by the subsequent Incapacity of the principal; provided, however, that in the event of the assignment by a Member of all of its Interest in the Company, the foregoing power of attorney of an assignor Member shall survive such assignment only until such time as the Assignee shall have been admitted to the Company as a Substitute Member and all required documents and instruments shall have been duly executed, filed, and recorded to effect such substitution.

9.19 Force Majeure. The parties to this Agreement shall be excused from performance of their obligations under this Agreement where they are prevented from so performing by revolutions, terrorism or similar disorders, wars, acts of enemies, strikes, fires, floods, acts of God, or, without limiting the foregoing, by any cause not within the control of the party whose performance is interfered with, and which, by the exercise of reasonable diligence, the party is unable to prevent. All parties shall perform such parts or aspects of their obligations as are not interfered with by these causes.

9.20 Limitation On Creditors’ Interests. No creditor who makes a non-recourse loan to the Company shall have or acquire at any time, as a result of making such loan, any direct or indirect interest in the profits, capital, or property of the Company, other than as a secured creditor.

9.21 No Liability For Return of Capital. No Member shall be personally liable for the return of all or any part of the Capital Contributions of the other Members. Any such return shall be made solely from Company Assets.

9.22 Good Faith. The Members shall deal with one another fairly, reasonably and in good faith. Except as is expressly provided otherwise in this Agreement, neither party shall unreasonably withhold, condition or delay its consent in any situation in which this Agreement calls for consent.

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9.23 Time of Essence. Time shall be of the essence with respect to all matters contemplated by this Agreement.

9.24 1031 Exchange Cooperation. Notwithstanding anything to the contrary contained herein, each of the parties hereto hereby acknowledges and agrees that, to the extent requested, it shall cooperate with the other party to enable the other party to conduct a tax-free exchange under Section 1031 of the Code. Each party hereby agrees to take all reasonable steps to facilitate any such exchange if requested by the other party, provided that (a) no party making such accommodation shall be required to acquire any substitute property, (b) such exchange shall not affect the representations, warranties, liabilities and obligations of the parties to each other under this Agreement, (c) no party making such accommodation shall make any representations or warranties concerning tax treatment to the other party or incur any additional cost, expense or liability in connection with such exchange (other than expenses of reviewing and executing documents required in connection with such exchange), and (d) no dates in this Agreement will be extended as a result thereof.

9.25 REIT Restrictions. NHP/PMB’s Controlling Principal is a real estate investment trust (“REIT”) and is subject to the provisions of Code Sections 856 through and including Code Section 860.

(a) So long as NHP/PMB’s Controlling Principal owns, directly or indirectly through one or more partnerships or entities that are disregarded for tax purposes, any interest in the Company, then notwithstanding any other provision of this Agreement, except for securities of a taxable REIT subsidiary of NHP/PMB’s Controlling Principal, the Company shall not own or acquire, directly or indirectly, securities that represent more than 10% of the total value or the total voting power of the outstanding securities of any issuer without the specific written approval of NHP/PMB’s Controlling Principal.

(b) So long as NHP/PMB’s Controlling Principal owns, directly or indirectly, any interest in the Company, then the Managing Member shall cause the Company to be operated (by any Property Manager and/or otherwise) in a manner that: (i) does not prevent NHP/PMB’s Controlling Principal from being taxed as a real estate investment trust under Sections 856-859 of the Code, as determined by NHP/PMB’s Controlling Principal; and (ii) unless otherwise determined by NHP/PMB’s Controlling Principal, would not result in the recognition of income that is not described in Section 856(c)(2) or Section 856(c)(3) of the Code.

(Signature Page Follows)

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

NHP/PMB:	NHP/PMB L.P.,
	a Delaware limited partnership
	By:	NHP/PMB GP LLC,
		a Delaware limited liability company,
		its General Partner
	By:	NHP Operating Partnership L.P.,
		a Delaware limited partnership,
		its Sole Member
	By:	NHP GP LLC,
		a Delaware limited liability company,
		its General Partner
	By:	Nationwide Health Properties, Inc.,
		a Maryland corporation,
		its Sole Member
	By:
	Name:
	Title:
RENOWN:	RENOWN BUSINESSES, a Nevada corporation
	By:
	Name:
	Title:

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EXHIBIT A

MEMBERS, CAPITAL CONTRIBUTION,

CAPITAL ACCOUNTS AND PERCENTAGE INTERESTS

Name and Address of Members	Capital Contributions	Capital Accounts	Percentage Interests
NHP/PMB L.P. 610 Newport Center Drive, Suite 1150 Newport Beach, CA 92660 Attention: Doug Pasquale	$	$	50	%
Renown Businesses	$	$	50	%
Attention:

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EXHIBIT B

DILUTION OF DEFAULTING MEMBER’S INTEREST

Upon the occurrence of an event described in Section 3.3.1, all Percentage Interests shall thereupon be adjusted as follows:

Dilution of Percentage Interest:

1. Determine the percentage, stated as a fraction, the numerator of which is the aggregate amount of all Capital Contributions of the Defaulting Member theretofore received by the Company (excluding the Defaulted Contribution Amount) and the denominator of which is the aggregate amount of all Capital Contributions of all Members theretofore received by the Company (including the Defaulted Contribution Amount made by another Member).

2. Determine the amount equal to: (a) the Defaulting Member’s Percentage Interest immediately prior to such default, minus (b) the percentage determined under step 1 above.

3. Multiply the percentage from step 2 above by 1.5, and deduct the result of this calculation from the Defaulting Member’s Percentage Interest. This is the new Percentage Interest of the Defaulting Member from and after the date of the default. The amount by which the old Percentage Interest of the Defaulting Member exceeds the new Percentage Interest of the Defaulting Member shall be added to the Percentage Interest of the Non-Defaulting Member from and after the date of the default.

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EXHIBIT C

FAIR MARKET VALUE DETERMINATION PROCEDURES

If it becomes necessary to determine the Fair Market Value of any of the Company Assets pursuant to Section 7.8 hereof, the same shall me determined in accordance with the provisions of this Exhibit C.

Within ten (10) Business Days following receipt by the Managing Member of the Option Notice, a senior executive or other authorized representatives of each of the Managing Member and Renown (each, a “Representative”) shall meet (which meeting may be telephonically) (the “Meeting”) in an attempt to agree upon the Fair Market Value of such Company Assets, provided however, in no event shall either of the Managing Member or Renown be obligated to agree to any particular Fair Market Value of such Company Assets at such Meeting. In the event such Representatives agree upon the Fair Market Value of such Company Assets at or in connection with the Meeting, the same shall be confirmed, in writing, in which event the Fair Market Value of such Company Assets as so agreed upon shall be final and binding upon each of the Managing Member and Renown. By way of clarification, each of the Managing Member and Renown acknowledge and agree that, in the event the Representatives are unable to agree upon the Fair Market Value of such Company Assets hereunder, the Fair Market Value of such Company Assets shall be determined as set forth below.

In the event that the Managing Member and Renown are unable to establish the Fair Market Value of such Company Assets (or in the event no Meeting is held), each of the Managing Member and Renown shall within twenty (20) days after the Managing Member’s receipt of the Option Notice select one MAI Appraiser (as hereinafter defined) to participate in the determination of the Fair Market Value of such Company Assets hereunder and shall notify the other Member of such selection, which notice shall include the name and address of the MAI Appraiser selected by such Member. Within ten (10) days after the timely selection of the last of the initial two (2) MAI Appraisers, such initial MAI Appraisers so selected by each Member shall each determine the Fair Market Value of such Company Assets hereunder. If such two (2) valuations are within ten percent (10%) of each other, then the average of such two (2) valuations shall be deemed to be the Fair Market Value of such Company Assets hereunder. If such two (2) valuations are not within ten percent (10%) of each other, then within ten (10) days of such determination, such initial MAI Appraisers so selected by each Member shall select a third MAI Appraiser. The three (3) selected MAI Appraisers shall each determine the Fair Market Value of such Company Assets hereunder within ten (10) days of the selection of the third MAI Appraiser. The Company shall pay the fees and expenses of the three (3) MAI Appraisers selected pursuant to this Exhibit C.

In the event either of the Managing Member or Renown fails to select a MAI Appraiser within the time period set forth in the foregoing paragraph, the MAI Appraiser selected by the other Member shall alone determine the Fair Market Value of such Company Assets hereunder in accordance with the provisions of this Exhibit C and such Fair Market Value as so determined shall be final and binding upon the Managing Member and Renown.

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In the event the MAI Appraisers selected by the Managing Member and Renown are unable to agree upon a third MAI Appraiser within the time period set forth above, the Managing Member and Renown shall endeavor, reasonably and in good faith, to agree upon a third MAI Appraiser. In the event the Managing Member and Renown are unable to so agree within twenty (20) days after the timely selection of the last of the initial two (2) MAI Appraisers, such dispute shall be submitted to, and resolved under binding arbitration pursuant to Section 9.15 hereof (the cost of any such arbitration to be paid by the Company, excluding the costs incurred by either of the Managing Member or Renown in participating in the same, which shall be borne by such Member).

If the initial two (2) MAI Appraisers are timely selected and a third (3^rd) MAI Appraiser is selected pursuant to the provisions above, then the Fair Market Value of such Company Assets for purposes of this Exhibit C shall be the average of the two (2) nearest valuations and shall be final and binding upon the Managing Member and Renown. Notwithstanding the foregoing, in the event any of the MAI Appraisers fails to timely determine the Fair Market Value of such Company Assets as provided above, the final and binding Fair Market Value of such Company Assets shall be (x) the average of the appraisals (if two (2) of the MAI Appraisers timely determine the Fair Market Value of such Company Assets) or (y) the appraised value (if only one (1) of the MAI Appraisers timely determines the Fair Market Value of such Company Assets).

The Managing Member and Renown shall, and shall cause the Company to, at all times cooperate reasonably and in good faith, and in a timely manner, with the MAI Appraisers so as to facilitate the appraisal processes hereunder.

“MAI Appraiser” shall mean an appraiser licensed or otherwise qualified to do business in the State of Nevada, independent and not an Affiliate of either NHP/PMB or Renown and who has substantial experience in performing appraisals of medical office buildings similar to the Property and is certified as a member of the American Institute of Real Estate Appraisers or certified as a SRPA by the Society of Real Estate Appraisers, or, if such organizations no longer exist or certify appraisers, such successor organization or such other organization as is mutually agreed upon by the Managing Member and Renown, which approval shall not be unreasonably withheld, conditioned or delayed.

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EXHIBIT D

INTERIM REPORT TEMPLATE

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EXHIBIT E

EXISTING COMPETING MEDICAL OFFICE BUILDINGS

Renown and its Affiliate’s Buildings:

NHP/PMB and its Affiliate’s Buildings:

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EXHIBIT “B”

FORM OF AMENDMENT TO TERRACE GROUND LEASE

See attached.

Exhibit B-1

FIRST AMENDMENT

TO

GROUND LEASE

This FIRST AMENDMENT TO GROUND LEASE (this “First Amendment”) is made and entered into as of             , 2008 (the “Effective Date”), by and between RENOWN BUSINESSES (formerly known as Washoe Professional Center, Inc.), a Nevada corporation (“Landlord”), and THE TERRACE AT SOUTH MEADOWS, LLC, a Delaware limited liability company (“Tenant”).

RECITALS

A. Landlord is the “Landlord” and Tenant is the “Tenant” pursuant to that certain Ground Lease dated February 12, 2003 (as amended by this First Amendment, the “Lease”), affecting certain premises located within the Washoe Medical Center South Meadows Campus, in the City of Reno, County of Washoe and State of Nevada. The Premises are more particularly described in Exhibit “A” attached hereto and incorporated herein by reference.

B. Tenant is governed by the terms and conditions of that certain Amended and Restated Limited Liability Company Agreement of The Terrace at South Meadows, LLC (“Operating Agreement”), dated as of             , 2008 (“Operating Agreement Effective Date”), by and between Landlord and NHP/PMB L.P., a Delaware limited partnership.

C. As of the Effective Date, Landlord owns fifty percent (50%) of the Membership Interests and Economic Interests (each, as defined in the Operating Agreement) of Tenant (collectively, the “Landlord Membership Interests”) in accordance with the Operating Agreement.

D. Landlord and Tenant desire to amend certain of the terms and provisions of the Lease, upon the terms and conditions set forth in this Amendment.

AGREEMENT

NOW, THEREFORE, Landlord and Tenant agree as follows:

1. Definitions. All capitalized terms used in this First Amendment and not otherwise defined herein shall have the meanings given to such terms in the Lease (as amended hereby).

2. Leasehold Mortgages. The first sentence of Section 12.2 of the Lease is hereby deleted in its entirety and amended to read as follows:

“Tenant shall have the right at any time and from time to time during the Term, and without Landlord’s consent to encumber Tenant’s interest under this Lease and any Improvements located on the Premises by Mortgage for the benefit of any Mortgagee as collateral security for the repayment of any indebtedness procured by Tenant to finance the construction, restoration or

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alteration of Improvements located on the Premises, recapitalize Tenant, or to finance Tenant’s operations on the Property (herein, “Mortgage Indebtedness”); provided, however, that notwithstanding the foregoing, (a) Landlord’s prior written consent shall be required for any encumbrance by Tenant of its interest under this Lease and any Improvements by Mortgage for the benefit of any Mortgagee as collateral security for the repayment of any Mortgage Indebtedness if at the time of incurrence of any such Mortgage Indebtedness either (i) the LTVR exceeds eighty percent (80%) or (ii) the DSCR is less than 1.25x, and (b) no Mortgage may encumber or create a security interest in Landlord’s fee title to the Premises.”

3. Landlord’s Option to Purchase. The following shall be added as Section 12.5 to the Lease:

“12.5 Landlord’s Option to Purchase.

12.5.1 Landlord’s Option. If Landlord has transferred all of Landlord’s right, title and interest in and to the Landlord Membership Interests to one or more third parties in accordance with the terms of the Operating Agreement (so that neither Landlord nor its Affiliates have any Membership Interests or Economic Interests (each as defined in the Operating Agreement) in Tenant or any other rights under the Operating Agreement), then, if applicable, starting on the date of the closing of such transfer (the “Commencement Date”), Landlord shall have the option to purchase (the “Purchase Option”) Tenant’s interest in the Lease and in the Improvements on each Term Option Date to the extent any remain at such time, at a price (“Price”) equal to the Agreed Value. The “Agreed Value” shall mean the then fair market value of the Tenant’s leasehold interest in the Premises and Tenant’s interest in the Improvements (“FMV”); provided, however, that if Landlord is entitled to and exercises its Purchase Option for the first (1^st) Term Option Date (i.e., the fifth (5^th) anniversary of the Operating Agreement Effective Date, the “Agreed Value” shall be the greater of (a) the FMV or (b) $[Contribution Value].

12.5.2 Exercise of Option. Landlord may exercise this option only by delivery of an irrevocable (subject to the terms of Section 12.5.3 below) written notice of such exercise thereof to Tenant (“Option Notice”) not less than six (6) months before the applicable Term Option Date.

12.5.3 FMV Determination. Unless Landlord and Tenant agree to the FMV within twenty (20) days after delivery of the Option Notice, each of Landlord and Tenant shall select an Appraiser within such twenty (20) day period to participate in the determination of the FMV hereunder and shall notify the other of such selection, which notice shall include the name and address of such Appraiser. Within ten (10) days after the timely selection of the last of the initial two (2) Appraisers, such Appraisers shall each determine the FMV. If such two (2) valuations are within ten percent (10%) of each other, then the average of such two (2) valuations shall be deemed to be the FMV. If such two (2) valuations are not within ten percent (10%) of each other, then within ten (10) days of such determination, such initial Appraisers shall select a third (3^rd) Appraiser. The three (3) Appraisers shall each determine the FMV within ten (10) days of the selection of the third (3^rd) Appraiser. If three (3) Appraisers are timely selected and they timely submit their valuations, then the FMV shall be the average of the

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two (2) nearest valuations and shall be final and binding on Landlord and Tenant. Notwithstanding the foregoing, in the event that any Appraiser fails to timely determine the FMV as provided above (or if either Landlord or Tenant fails to timely select an Appraiser or if the Appraisers fail to timely select a third (3^rd) Appraiser), the final and binding FMV shall be (a) the average of the valuations of two (2) of the Appraisers, if two (2) timely determine the FMV or (b) the valuation of one (1) of the Appraisers, if only one (1) timely determines the FMV. Landlord shall pay the fees and expenses of its Appraiser, Tenant shall pay the fees and expenses of its Appraiser and, if applicable, the fees and expenses of the third (3^rd) Appraiser shall be paid equally by Landlord and Tenant. If the FMV, as so determined by the Appraiser(s), is not acceptable to Landlord, in its sole discretion, Landlord may revoke its notice of exercise by delivering written notice of such revocation to Tenant within ten (10) business days after the receipt of such determination, in which case Landlord’s future option rights under this Section 12.5.3 shall be restored and remain in effect; provided, however, that Landlord shall reimburse Tenant for its costs associated with determining the FMV, including the fees and expenses of the Appraiser(s). As used in this Section 12.5.3, “Appraiser” shall mean an appraiser licensed or otherwise qualified to do business in the State of Nevada, independent and not an Affiliate of either Landlord or Tenant and who has substantial experience in performing appraisals of medical office buildings similar to the Premises and is certified as a member of the American Institute of Real Estate Appraisers or certified as a SRPA by the Society of Real Estate Appraisers, or, if such organizations no longer exist or certify appraisers, such successor organization or such other organization as is mutually agreed upon by Landlord and Tenant, which approval shall not be unreasonably withheld, conditioned or delayed.

12.5.4 Escrow; Closing. On exercise of the Purchase Option, Landlord and Tenant shall open escrow with a mutually acceptable nationally recognized escrow company whose fees shall be paid equally by Landlord and Tenant. Escrow will close on the applicable Term Option Date, at which time Tenant shall convey title to its leasehold interest in the Premises and its interest in the Improvements free and clear of all liens, encumbrances and any other irregular title exceptions not approved or created by Landlord or otherwise affecting the Premises prior to the inception of the Lease; provided, however, that if any prepayment penalties or loan assumption fees or costs become due with respect to any Mortgage Indebtedness as a result of transactions contemplated by this Section 12.5, such costs and fees shall be borne solely by Landlord.”

4. Right of First Refusal. The following shall be added as Section 12.6 to the Lease:

“12.6 Landlord’s Right of First Refusal.

12.6.1 Offer. If Landlord has transferred all of Landlord’s right, title and interest in and to the Landlord Membership Interests to one or more third parties in accordance with the terms of the Operating Agreement (so that neither Landlord nor its Affiliates have any Membership Interests or Economic Interests (each as defined in the Operating Agreement) in Tenant or any other rights under the Operating Agreement), and following such transfer by Landlord, Tenant desires to sell or otherwise transfer the Improvements or Tenant’s interest in

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this Lease (the “ROFR Property”) to a third party (other than an Affiliate) (the “Proposed Purchaser”), Tenant shall first comply with the following procedure:

12.6.1.1 ROFR Notice. Promptly after the initiation of an offer from a Proposed Purchaser to Tenant or an offer from Tenant to such Proposed Purchaser with respect to a sale or transfer of the ROFR Property, Tenant shall provide Landlord written notice (the “ROFR Notice”) specifying the price (the “First Offer Price”) and the terms and conditions of such proposed sale or transfer.

12.6.1.2 Acceptance Notice. If Landlord wishes to exercise the right of first refusal with respect to the ROFR Property, then within fifteen (15) days after delivery of the ROFR Notice, Landlord shall deliver an irrevocable written notice to Tenant of its intent to purchase the ROFR Property upon the terms and conditions set forth in the ROFR Notice (“Acceptance Notice”). If Landlord timely delivers the Acceptance Notice, (a) the sale of the ROFR Property shall be made to Landlord for the First Offer Price on the terms and conditions set forth in the ROFR Notice, and (b) such sale shall close, and Tenant shall deliver Landlord possession of the ROFR Property, forty-five (45) days after Landlord delivers the Acceptance Notice to Tenant.

12.6.1.3 Failure to Accept. If Landlord declines to purchase the ROFR Property or fails to timely deliver the Acceptance Notice, then Tenant may effect the sale of such ROFR Property on the terms and conditions specified in the ROFR Notice with Landlord’s consent (which shall not be unreasonably withheld, conditioned or delayed); provided, however, Tenant shall not sell the ROFR Property on more favorable terms than are contained in the ROFR Notice, including the First Offer Price, without first providing Landlord another ROFR Notice as provided above. Notwithstanding the foregoing, if Landlord declines to exercise its rights under this Section and Tenant fails to sell such Leasehold Estate within six (6) months after the date on which Tenant gives such ROFR Notice, then Landlord’s rights under this Section shall be reinstated as to the ROFR Property and apply to any subsequent assignment or sublease of the ROFR Property proposed by the Tenant. “

5. Property Management. During the Term, Tenant shall cause the Premises to be managed by a Property Manager approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord hereby approves of PMB Real Estate Services, LLC, Landlord or any Affiliate of Landlord as the Property Manager of the Premises.

6. Exhibit B — Definitions. Exhibit B to the Lease is hereby amended to add the following defined terms thereto:

““DSCR” shall mean the ratio, as of the date of incurrence of any Mortgage Indebtedness incurred by Tenant, in which the numerator is equal to the then current annual Net Operating Income of Tenant and the denominator is equal to the projected Mortgage Debt Service for the ensuing twelve (12) months.

“Formation and Contribution Agreement” shall have the meaning set forth in the Operating Agreement.

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“Landlord Membership Interests” shall have the meaning set forth in Recital C of the First Amendment to this Lease.

“LTVR” shall mean the ratio, as of the date of incurrence of any Mortgage Indebtedness incurred by Tenant, in which the numerator is equal to the outstanding principal balance of all Mortgage Indebtedness of Tenant and the denominator is equal to the fair market value of Tenant’s interest under this Lease and the Improvements, as reasonably and in good faith determined by Tenant.

“Mortgage Debt Service” shall mean, as of the date of incurrence of any Mortgage Indebtedness incurred by Tenant, all principal and interest payments projected for the next twelve (12) months on all Mortgage Indebtedness of Tenant.

“Net Operating Income” means the gross income received by Tenant from the operation of the Property for the period of determination in question with the rental income based on the actual rent received by Tenant, less the actual expenses incurred and/or paid by Tenant in connection with the operation and maintenance of the Property that are allocable to such period, computed without regard to depreciation or debt service, but otherwise in accordance with generally accepted accounting principles consistently applied.

“Operating Agreement” shall have the meaning set forth in Recital B of the First Amendment to this Lease.

“Operating Agreement Effective Date” shall have the meaning set forth in Recital B of the First Amendment to this Lease.

“Property Manager” means the Person responsible for the day to day management of the Premise and marketing of available space therein, including preparation of operating expense budgets therefor, and the maintenance, cleaning, care, security and safety of the Premises.

“Term Option Date” means each of the fifth (5^th), tenth (10^th), fifteenth (15^th) and twentieth (20^th) anniversary of the Operating Agreement Effective Date.”

7. No Other Changes. Except for the foregoing changes in the Lease, the parties ratify and confirm the Lease. Landlord and Tenant acknowledge and agree that the Lease, as hereby amended, is in full force and effect in accordance with its terms. Any inconsistency between this First Amendment and the Lease (as it existed before this Amendment) shall be resolved in favor of this First Amendment. Wherever the Lease refers to the “Lease”, such reference shall be deemed to refer to the Lease as modified by this First Amendment.

8. Full Force and Effect. The Lease is in full force and effect and has not been supplemented, modified or otherwise amended, or canceled, terminated, or surrendered, except pursuant to this First Amendment. The Lease, as modified by this First Amendment

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represents the entire agreement and understanding between Tenant and Landlord with respect to Tenant’s occupancy of the Premises and all other matters relating to the Premises.

9. Miscellaneous.

9.1. Representations and Warranties. Each party represents and warrants that it has the legal power and authority to enter into this First Amendment without consent or approval by any third party, and that this First Amendment is a valid, legal, and binding obligation of such party enforceable in accordance with its terms.

9.2. Further Assurances. Each party shall take such further actions as shall be reasonably necessary from time to time to implement and effectuate the intentions of the parties expressed in this First Amendment.

9.3. Amendments. The Lease may not be further amended, discharged or terminated except by a written instrument executed by the parties.

9.4. Counterparts. This Amendment may be executed in counterparts, each of which shall be an original, but all of which shall constitute a single agreement.

[Remainder of Page Left Blank Intentionally]

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IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment as of the Effective Date.

LANDLORD:
RENOWN BUSINESSES, a Nevada corporation
By:
Name:
Title:
TENANT:
THE TERRACE AT SOUTH MEADOWS, LLC, a Delaware limited liability company
By:	NHP/PMB L.P., a Delaware limited partnership, its Managing Member
By:	NHP/PMB GP LLC, a Delaware limited liability company, its General Partner
By:	NHP Operating Partnership L.P., a Delaware limited partnership, its Sole Member
By:	NHP GP LLC, a Delaware limited liability company, its General Partner
By:	Nationwide Health Properties, Inc. a Maryland corporation, its Sole Member
By:
Name:
Title:

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EXHIBIT A

LEGAL DESCRIPTION OF PREMISES

All that certain lot, piece or parcel of land situate in the County of Washoe, State of Nevada, described as follows:

Parcel 2 of Merger & Resubdivision Parcel Map 3929 for Washoe Health System, Inc., recorded November 14, 2002, as File No. 2763202, Official Records, Washoe County, Nevada.

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EXHIBIT “C”

FORM OF PUT AGREEMENT

See attached.

Exhibit C-1

PUT AGREEMENT

This PUT AGREEMENT (this “Agreement”), is made and entered into effective as of             , 2008 (the “Effective Date”), by and between NHP/PMB L.P., a Delaware limited partnership (“Operating Partnership”), and PMB LLC, a California limited liability company (“PMB” together with Operating Partnership, the “Parties,” with each being referred to, individually, as a “Party”) and, solely with respect to the Guaranteed Obligations (as defined in Section 10.1 hereof), JEFFREY L. RUSH, an individual, MARK D. TOOTHACRE, an individual, ELIZABETH A. POWELL, an individual, KIMBERLY B. COCHRANE, an individual, ROBERT A. ROSENTHAL, an individual, EVAN M. STONE, an individual, JOHN HUSSEY III, an individual, GREG NELSON, an individual, and JIM ROHAN, an individual (each, a “Guarantor”, and collectively, the “Guarantors”). All capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Operating Agreement (as hereinafter defined).

RECITALS

A. The Operating Partnership and Renown Businesses, a Nevada corporation (“Renown”), are the sole members of The Terrace at South Meadows, LLC, a Delaware limited liability company (“Terrace”).

B. Terrace is governed by the terms and conditions of that certain Amended and Restated Limited Liability Company Agreement of The Terrace at South Meadows, LLC (“Operating Agreement”), dated as of             , 2008, by and between Renown and Operating Partnership.

C. Terrace is the ground lessee of that certain real property located within the Washoe Medical Center South Meadows Campus, in the City of Reno, County of Washoe and State of Nevada (the “Premises”) pursuant to that certain Ground Lease, dated February 12, 2003 (the “Original Lease”), as amended by the First Amendment to Ground Lease, dated as of             , 2008 (the “First Amendment,” and together with the Original Lease, the “Lease”). The Premises are more particularly described in the Lease.

D. Terrace previously constructed on the Premises a three-story medical office building complex with a rentable area of approximately sixty thousand nine hundred and fifty-three (60,953) square feet pursuant to the Lease (such medical office building, together with all right, title and interest of Terrace as tenant under the Lease, and all other improvements and rights related thereto, the “Property”).

E. In connection with the execution and delivery of the Operating Agreement and the First Amendment, the Parties now desire to enter into this Agreement.

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AGREEMENT

NOW, THEREFORE, for and in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

1. Put Right.

1.1 Grant of Put Right. Subject to Renown’s Right of First Refusal (as described in Section 7.1.2 of the Operating Agreement), Operating Partnership or any Affiliate of Operating Partnership who is a successor-in-interest to Operating Partnership (herein, sometimes referred to as the “Put Member”) shall have the right (the “Put Right”), in its sole and absolute discretion, to require PMB to purchase from the Put Member all of the Put Member’s right, title and interest in and to its entire Membership Interest and Economic Interest (collectively referred to herein as the “Put Interests”) in Terrace, if at any time during the Term (as hereinafter defined): (a) the Put Member desires to sell, transfer or otherwise convey its entire Membership Interest in Terrace to any non-Affiliated third party, and Renown or any successor-in-interest to Renown’s Membership Interest and Economic Interest in and to Terrace (herein, sometimes referred to as the “Hospital Member”) either (i) fails to consent to such sale, transfer or conveyance in accordance with Section 7.1.1 of the Operating Agreement or (ii) consents to such sale, transfer or conveyance (or the Put Member is otherwise permitted to Transfer its Membership Interest or Economic Interest without consent pursuant to the provisions of Section 7.1.2 of the Operating Agreement), but fails to consent to the Put Member’s Assignee becoming a Substituted Member; or (b) the Put Member desires to cause Terrace to sell or transfer all of its right, title and interest in and to the Property to any non-Affiliated third party, and the Hospital Member does not consent to such sale or transfer in accordance with Section 6.2.1(e) of the Operating Agreement (the events described in items (a) and (b) above are each referred to herein as a “Put Event”). The Put Right shall be exercised by the Put Member by delivery of a written notice (the “Put Notice”) to PMB, which Put Notice shall (A) be delivered to PMB within sixty (60) days after the occurrence of a Put Event (or, if there are fewer than sixty (60) days remaining in the Term (as hereinafter defined), then the Put Notice shall be delivered on or before the expiration of the Term), (B) set forth in reasonable detail the facts giving rise to the Put Member’s right to exercise such Put Right, and (C) shall include such information as is required by Section 4 hereof. If the Put Notice delivered by Put Member does not satisfy the requirement set forth in subsection (A) of the preceding sentence, Put Member shall not be entitled to deliver another Put Notice unless and until a subsequent Put Event occurs. Notwithstanding anything contained herein to the contrary, if the Put Member proposes to cause Terrace to sell its interest in the Property and the Hospital Member approves a sale, but disapproves of a particular purchaser, the Put Member shall not have the Put Right granted pursuant to this Section 1.1.

1.2 Purchase Price. The aggregate purchase price to be paid by PMB to the Put Member for the Put Interests upon the exercise of the Put Right hereunder (the “Purchase Price”) shall be the amount that the Put Member would receive, if, as of the date on which the Put Notice is delivered, the Company Assets were sold at the Agreed Value (as hereinafter defined) and Terrace immediately paid all debts and liabilities of Terrace and distributed the net

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proceeds of such sale and any other liquid assets of Terrace among the Members in accordance with the provisions of Section 8.5.1 of the Operating Agreement. As used herein, the term “Agreed Value” shall mean (a) if the Put Member is entitled to and exercises the Put Right on or before the fifth (5^th) anniversary of the Effective Date, the greater of (i) [$             INSERT CONTRIBUTION VALUE FOR PROPERTY] and (ii) the Fair Market Value of the Company Assets as of the date on which the Put Notice is delivered, and (b) if the Put Member is entitled to and exercises the Put Right after the fifth (5^th) anniversary of the Effective Date, the Fair Market Value of the Company Assets as of the date on which the Put Notice is delivered. The Purchase Price shall be subject to customary prorations, adjustments and closing costs which shall be allocated between the Parties in the same manner as prorations, adjustments and closing costs are allocated pursuant to the Formation and Contribution Agreement related to the “Terrace Contribution” (as defined therein). For purposes of this Agreement, the “Fair Market Value of the Company Assets” shall be determined in accordance with the procedures set forth on Exhibit C to the Operating Agreement, except that all references therein to the “Managing Member” shall mean and refer instead to the Put Member, and all references therein to “Renown” shall mean and refer instead to PMB.

1.3 Payment Date. Upon delivery to PMB by the Put Member of the Put Notice hereunder, and satisfaction by the Put Member of the conditions precedent set forth in Section 8 hereof, PMB shall be required to make payment of the Purchase Price in cash to the Put Member upon the later of (a) one hundred twenty (120) calendar days after receipt of such Put Notice or (b) thirty (30) calendar days following the date the Purchase Price is finally determined pursuant to Section 1.2 hereof. The date on which the Purchase Price is paid shall be referred to herein as the “Payment Date”. On the Payment Date, the Put Member shall (i) transfer to PMB (or its assignee or designee) the Put Interests free and clear of all liens, security interests and competing claims, and (ii) deliver to PMB such instruments of transfer and such evidence of due authorization, execution and delivery and of the absence of any such liens, security interests or competing claims as PMB shall reasonably request. Upon the Payment Date, all rights of the Put Member in Terrace shall be deemed terminated, and PMB (or its assignee or designee) shall be admitted as a Substitute Member and appointed as the Managing Member of Terrace in accordance with the terms of the Operating Agreement.

2. Termination. The term (the “Term”) of this Agreement shall commence upon the Effective Date and terminate (without any action by any Party hereto) upon the earlier to occur of (a) the date that is ten (10) years after the Effective Date, (b) the date upon which Terrace has sold, transferred or otherwise conveyed all or substantially all of its right, title and interest in and to the Property (whether to any third party, any Member or any Affiliate of any Member), (c) the date upon which the Put Member has sold, transferred or otherwise conveyed all or substantially all its Membership Interests or Economic Interests in Terrace to the other Member or to any other third party who is not an Affiliate of the Put Member, (d) the date upon which Operating Partnership and/or its Affiliates acquire(s) in one or more transactions one hundred percent (100%) of the Membership Interests or Economic Interests in Terrace, or (e) any Termination Event (as hereinafter defined).

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3. PMB’s Representations and Warranties. Unless otherwise stated herein, PMB, on behalf of itself and its designee (as applicable), represents and warrants (a) to Operating Partnership, as of the Effective Date, and (b) to the Put Member, as of the Payment Date, as follows:

3.1 No Conflicts. The execution and delivery of this Agreement by PMB, the consummation of the transactions herein contemplated to be performed by PMB, and compliance with the terms of this Agreement by PMB will not conflict with, or, with or without notice or the passage of time or both, result in a breach of any of the terms or provisions of, or constitute a default under (a) the operating agreement of PMB, (b) any indenture, loan agreement, or other document, instrument or agreement, oral or written, to which PMB is a party or by which PMB or its assets are bound, or (c) any applicable regulation of any governmental agency, or any judgment, order or decree of any court having jurisdiction over PMB.

3.2 Due Organization; Consent . PMB is a limited liability company duly organized, validly existing and in good standing under the laws of the State of California, with its principal place of business in the State of California. All requisite action has been taken by PMB in connection with entering into this Agreement, and will be taken by PMB or its designee, as applicable, prior to the Payment Date in connection with the execution and delivery of the instruments referenced herein and the consummation of the transactions contemplated hereby. No consent of any partner, member, beneficiary, creditor, investor, judicial or administrative body, governmental authority or other party is required in connection with the execution by PMB of this Agreement and/or the performance by PMB of its obligations hereunder.

3.3 PMB’s Authority; Validity of Agreements. PMB has full right, power and authority to accept the Put Interests as provided in this Agreement, to carry out its obligations hereunder and to execute, deliver and perform, and enter into and consummate, all of the documents and transactions contemplated by this Agreement. The individual(s) executing this Agreement on behalf of PMB and the instruments referenced herein on behalf of PMB have the legal power, right and actual authority to bind PMB to the terms hereof and thereof. This Agreement is, and all other documents and instruments to be executed and delivered by PMB in connection herewith shall be, duly authorized, executed and delivered by PMB and shall be valid, binding and enforceable obligations of PMB, except to the extent that the enforceability hereof and thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law).

3.4 Survival. All of the representations and warranties of PMB set forth in this Section 3 shall survive the Payment Date for a period of one (1) year; provided, however, that the representations set forth in Sections 3.2 and 3.3 hereof shall survive for the period of the applicable statute of limitations.

4. Put Member’s Representations and Warranties. By delivery of a Put Notice, the Put Member shall be deemed to have made the following representations and warranties to PMB as of the date of the Put Notice and as of the Payment Date (unless otherwise stated herein):

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4.1 No Conflicts. The delivery of such Put Notice, the consummation of the transactions herein contemplated to be performed by the Put Member in connection therewith and compliance with the terms of this Agreement by the Put Member do not (so long as the Right of First Refusal provisions described in Section 7.1.2 of the Operating Agreement are complied with) conflict with, or, with or without notice or the passage of time or both, result in a breach of any of the terms or provisions of, or constitute a default under, (a) the Put Member’s operating agreement, (b) any indenture, loan agreement, or other document, instrument or agreement, oral or written, to which Terrace or the Put Member is a party or by which Terrace or the Put Member or their assets are bound, or (c) any applicable regulation of any governmental agency, or any judgment, order or decree of any court having jurisdiction over Terrace or the Put Member.

4.2 Due Organization; Consents. The Put Member is a duly organized entity of the type set forth in the Put Notice, validly existing and in good standing under the laws of the State in which it was formed as identified in the Put Notice. Terrace is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, with its principal place of business in the State of Nevada. As of the Payment Date, Terrace is duly qualified or licensed as a foreign limited liability company in the State of Nevada and in each other jurisdiction where the character of the properties owned, leased or operated or the nature of the business conducted by Terrace makes such qualification or licensing necessary. All requisite action has been taken by the Put Member in connection with the delivery of the Put Notice, and will be taken prior to the Payment Date in connection with the execution and delivery of the instruments referenced herein and the consummation of the transactions contemplated hereby. Subject to complying with the Right of First Refusal provisions described in Section 7.1.2 of the Operating Agreement, no consent of any partner, shareholder, beneficiary, creditor, investor, judicial or administrative body, governmental authority or other party is required in connection with the delivery by the Put Member of the Put Notice and/or the performance by the Put Member of its obligations hereunder.

4.3 Put Member’s Authority; Validity of Agreements. Subject to complying with the Right of First Refusal provisions described in Section 7.1.2 of the Operating Agreement, the Put Member has the full right, power and authority to: (a) transfer, contribute and convey the Put Interests to PMB (or its assignee(s) or designee(s)) as provided in this Agreement, and (b) to carry out its obligations hereunder and to execute, deliver and perform, and enter into and consummate, all of the documents and transactions contemplated by this Agreement. The individual executing the instruments referenced herein on behalf of the Put Member has the legal power, right and actual authority to bind the Put Member to the terms hereof and thereof. All instruments, documents and agreements to be executed by the Put Member in connection herewith shall be, duly authorized, executed and delivered by the Put Member and shall be valid, binding and enforceable obligations of the Put Member, except to the extent that the enforceability hereof and thereof may be limited by applicable bankruptcy, insolvency,

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reorganization, moratorium or similar laws affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law).

4.4 Ownership. Exhibit “A” attached to the Put Notice contains a true, correct and complete list of all of the Members of Terrace and their respective Membership Interests and Economic Interests as of the date of the Put Notice (which shall be updated as of the Payment Date, if necessary).

4.5 Contracts. Exhibit “B” attached to the Put Notice (the “Contracts Schedule”), contains a true, correct and complete list of any and all contracts, contract rights, and obligations, including all property management, employee, insurance, maintenance, repair, management supply or other material contracts relating to the Property (the “Contracts”), which would be binding on the owner of the Property subsequent to the Payment Date. To the Put Member’s knowledge, each Contract is in good standing and in full force and effect and has not been previously assigned, transferred, pledged, hypothecated or otherwise encumbered, and Terrace is not in material default thereunder (nor does the Put Member have any knowledge of any event or circumstance which, with or without the giving of notice, the passage of time or both, may constitute a material default thereunder). To the Put Member’s knowledge, neither Terrace nor the Put Member has received any notice of any claimed default under or violation of any Contracts (that will not have been cured on or before the Payment Date). To the Put Member’s knowledge, all fees and other sums required to be paid under the terms of each Contract have been paid. On or before the Payment Date, copies of each Contract will be furnished to PMB or made available during normal business hours at the offices of the Put Member or of Terrace, and all such Contracts are true, complete and correct copies of the same and have not been amended, modified or supplemented other than as furnished to PMB.

4.6 Rent Roll. Exhibit “C” attached to the Put Notice (the “Rent Roll”) is, in all material respects, a true, correct and complete list of all of the leases, subleases, licenses, tenancies and other occupancy agreements (whether written or oral) (each, a “Lease” and, collectively, the “Leases”) in effect at the Property as of the date of the Put Notice and includes a statement of the outstanding balance of all sums to which tenants remain entitled for tenant improvement work associated with each Lease. To the Put Member’s knowledge, Terrace is not in material default under any Lease (nor does the Put Member have any knowledge of any event or circumstance which, with or without the giving of notice, the passage of time or both, may constitute a material default thereunder). Except as may otherwise be set forth in the Put Notice, to the Put Member’s knowledge, (a) each Lease is in good standing and in full force and effect and has not been previously assigned, transferred, pledged, hypothecated or otherwise encumbered, and (b) neither Terrace nor the Put Member has received any notice of any claimed default under or violation of any Leases (that will not have been cured on or before the Payment Date).

4.7 No Violation of Laws. Since the Effective Date, to the Put Member’s knowledge, Terrace has not received any written notices of any material violations of any laws, ordinances, orders or requirements of any governmental authority, agency or officer having jurisdiction affecting the Property and/or Terrace, which have not been materially complied with previously.

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4.8 Partnership Not Reporting Company. Since the Effective Date, Terrace is not required to file reports pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended.

4.9 Not a Prohibited Person. As used herein, the term “Prohibited Person” shall mean any of the following: (a) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001) (the “Executive Order”); (b) a person or entity owned or controlled by, or acting for or on behalf of any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (c) a person or entity that is named as a “specially designated national” or “blocked person” on the most current list published by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) at its official website, http://www.treas.gov/offices/enforcement/ofac; (d) a person or entity that is otherwise the target of any economic sanctions program currently administered by OFAC; or (e) a person or entity that is affiliated with any person or entity identified in clause (a), (b), (c) and/or (d) above. To the Put Member’s knowledge, none of the investors, affiliates or brokers or other agents (if any) of the Put Member, acting or benefiting in any capacity in connection with this Agreement is a Prohibited Person. The Put Interests are not the property of, and are not beneficially owned, directly or indirectly, by a Prohibited Person. The assets the Put Member will transfer to PMB (or its assignee or designee) under this Agreement and/or any other document executed in connection with the transactions contemplated hereby are not the proceeds of specified unlawful activity as defined by 18 U.S.C. §1956(c)(7).

4.10 Employees.

(a) Terrace has no employees and since the Effective Date has never had any employees.

(b) Since the Effective Date, Terrace is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees.

(c) Since the Effective Date, neither Terrace nor any trade or business (whether or not incorporated) that, together with Terrace, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and Section 412 of the Code, is treated as a single employer under Section 414 of the Code (an “ERISA Affiliate”) has ever, sponsored, maintained, contributed, been a party to or been required to sponsor, maintain or contribute to any of the following: (i) any deferred compensation, bonus or other incentive compensation, stock purchase, stock option and other equity compensation plan, program, agreement or arrangement, severance or termination pay, medical, surgical, hospitalization, life insurance and other “welfare” plan, fund or program (including, but not limited to, within the meaning of Section 3(1) of ERISA ); (ii) any profit sharing, stock bonus or other “pension” plan, fund, program or arrangement (including, but not limited to, within the meaning of Section 3(2) of ERISA); (iii) any employment, termination or severance plan, program, agreement

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or arrangement or (iv) any other employee benefit plan, fund, program, agreement or arrangement for the benefit of any employee or former employee of Terrace or any of its ERISA Affiliates. Since the Effective Date, neither Terrace nor any ERISA Affiliate has ever made, or ever been required to make, contributions to any “multi-employer plan” (within the meaning of Section 3(37) of ERISA).

4.11 Tax Matters.

(a) Since the Effective Date, Terrace has, at all times been classified for U.S. Federal income tax purposes as a partnership and not as a corporation.

(b) Terrace is not, and as of the Payment Date, Terrace will not be, a “publicly traded partnership” within the meaning of Section 7704 of the Code.

(c) Terrace holds no material assets other than its interest in the Property, the Contracts identified on the Contracts Schedule, the Leases identified on the Rent Roll and intellectual, intangible and/or personal property which is incidental to such ownership.

(d) Since the Effective Date, Terrace has timely filed (including all proper extensions) all material Tax Returns (as hereinafter defined) required to be filed and has paid all Taxes (as hereinafter defined) shown to be due thereon (to the extent such amounts were payable by it). All such Tax Returns are true, complete and accurate in all material respects. For purposes of this Agreement, “Taxes” shall include, without limitation, all Federal, state, local and foreign income, property, sales, use, excise, payroll, franchise, withholding, disability and other taxes, assessments and similar governmental charges together with any penalties, interest or additions thereto. For purposes of this Agreement, “Tax Return” shall mean all returns, reports, statements or other information, whether submitted or sent in writing or electronically, relating to Taxes, including, but not limited to, income tax returns, employee wage and withholding statements and statements to partners and independent contractors.

(e) Except as may otherwise be set forth in the Put Notice, since the Effective Date, Terrace has not received any written notice of audit or investigation that is currently pending, and is not, to the knowledge of the Put Member, currently under any audit or investigation relating to material Taxes that has not been resolved as of the date hereof.

4.12 Litigation. Since the Effective Date, (a) there are no actions, investigations, suits or proceedings pending or, to the knowledge of the Put Member, threatened against or affecting Terrace which would be reasonably expected to have material adverse impact on the business or assets of Terrace, and (b) except for unlawful detainer or similar actions that are brought in the ordinary course of business operations, there are no actions, suits or proceedings pending, contemplated or threatened by Terrace which would be reasonably expected to have material adverse impact on the business or assets of Terrace. Additionally, there are no judgments, orders, awards or decrees currently in effect against the Put Member with respect to the ownership of the Put Interests or against Terrace with respect to the operation of its business, which will not be fully discharged prior to the Payment Date. No attachments, execution

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proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings are pending, or, to the Put Member’s knowledge, threatened, against Terrace.

4.13 Absence of Undisclosed Liabilities. Since the Effective Date, Terrace has no liabilities or obligations of any kind or nature, whether absolute, contingent or accrued, and whether due or to become due, other than its Permitted Entity Liabilities (as defined in the Formation and Contribution Agreement) or as set forth on Exhibit “E” attached to the Put Notice.

4.14 Ownership and Adverse Claims. The Put Member owns the Put Interests free and clear of all security interests, liens, adverse claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, charges, hypothecations and other encumbrances of any nature whatsoever, other than such rights as are set forth in the Operating Agreement. Other than this Agreement and the Operating Agreement, the Put Interests are not subject to any contract, agreement, arrangement or understanding relating to the disposition of such Put Interests.

4.15 Foreign Investment in Real Property Tax Act. The Put Member is not a foreign person within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), and PMB is not required to withhold taxes from the payment of the Purchase Price to the Put Member under the Code or any applicable state, commonwealth, local or other tax laws.

4.16 Operating Agreement. To the Put Member’s knowledge, the Operating Agreement is in full force and effect, and the Put Member is not in material default thereunder (nor does the Put Member have any knowledge of any event or circumstance which, with or without the giving of notice, the passage of time or both, may constitute a material default thereunder). To the Put Member’s knowledge, the Put Member has not received any notice of any claimed default under or violation of the Operating Agreement. To the Put Member’s knowledge, the Hospital Member is not in material default under the Operating Agreement (nor does the Put Member have any knowledge of any event or circumstance which, with or without the giving of notice, the passage of time or both, may constitute a material default thereunder by the Hospital Member).

4.17 Survival. All of the representations and warranties of the Put Member set forth in this Section 4 shall survive the Payment Date for a period of one (1) year; provided, however, that the representations set forth in Sections 4.2, 4.3, 4.4 and 4.9 shall survive for the period of the applicable statute of limitations.

Notwithstanding anything to the contrary contained in this Agreement, if at the time of the delivery of the Put Notice or as of the Payment Date, any Affiliate of PMB (including, without limitation, PMB Real Estate Services LLC, a Delaware limited liability company “PMBRES”) shall then be providing any property management services or asset management services to Terrace or with respect to the Property so that such Affiliate of PMB is or was responsible (a) for entering into Contracts or Leases with respect to the Property or (b) for operating the Property in accordance with any laws, ordinances, orders or requirements of any governmental authority, agency or officer having jurisdiction over the Property, then the Put Member shall not be deemed to have made (and shall not be required to make) the representations and warranties contained in

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Sections 4.5, 4.6 and 4.7 hereof with respect to such matters solely to the extent relating to the period during which such Affiliate of PMB provided such services.

5. Put Member’s Covenants After the Delivery of the Put Notice. By delivery of a Put Notice, the Put Member shall be deemed to have covenanted and agreed that between the date of the delivery of the Put Notice and the Payment Date (or the date of earlier termination hereof, if applicable):

5.1 Ownership. The Put Member shall not directly or indirectly sell, contribute, assign or create any rights, title or interest whatsoever in or to the Put Interests, other than pursuant to any rights existing under the Operating Agreement of which the Put Member shall keep PMB apprised, or create or permit to exist thereon any lien, charge or encumbrance, or enter into any agreement to do any of the foregoing.

5.2 No Defaults. Terrace shall not default with respect to the performance of any of its material obligations under any Contract or Lease, including, without limitation, the payment of all amounts due and the performance of all material obligations with respect thereto. The Put Member shall cause Terrace to operate and maintain the Property in compliance with all applicable laws.

5.3 Contracts; Leases. The Put Member shall notify PMB and provide PMB with access to each new Contract and Lease entered into by Terrace following the date of the delivery of the Put Notice.

5.4 Notice of Change in Circumstances. The Put Member shall promptly notify PMB of any material change (collectively, “Changes”) in any condition or event or circumstance of which the Put Member obtains knowledge subsequent to the delivery of the Put Notice which (a) materially affects the Put Member, Terrace or the Put Right, (b) makes any representation or warranty of the Put Member under this Agreement untrue or misleading in any material respect or (c) makes any covenant or agreement of the Put Member under this Agreement incapable or substantially less likely of being performed, it being expressly understood that the obligation to provide information under this Section 5.4 shall in no way relieve the Put Member of any liability for a breach of its representations, warranties, covenants or agreements under this Agreement. If the Put Member becomes aware after delivering the Put Notice of any Changes that (i) make any of its representations or warranties under this Agreement (which were true, correct and complete as of the date of the delivery of the Put Notice) untrue, incorrect or incomplete or (ii) make any covenant or agreement of the Put Member under this Agreement (which was, as of the date of the delivery of the Put Notice, capable of being performed) incapable or substantially less likely of being performed, to the extent that such Changes are not the result of the Put Member’s (or any of its Affiliates’) breach of this Agreement, such Changes shall not constitute a default by the Put Member hereunder and the Put Member shall have no liability to PMB with respect thereto, but the Put Member shall promptly notify PMB of such Changes and PMB shall not be obligated to pay the Purchase Price unless and until such Changes have been cured or eliminated by the Put Member and such cure or elimination shall be deemed

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to be one of “PMB’s Conditions Precedent” (as hereinafter defined) and subject to the last sentence of Section 8 hereof.

5.5 Further Action, Reasonable Efforts. Upon the terms and subject to the conditions hereof, the Put Member shall use its reasonable efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, using its reasonable efforts to obtain all licenses, permits, consents, approvals, authorizations, certificates, qualifications and orders of, and make all filings and required submissions with, all Federal, state and local governmental and regulatory agencies, authorities, commissions and instrumentalities, and all partners of, and parties to contracts with, any of PMB, the Put Member or Terrace, in each case, as are necessary or desirable for the consummation of the transactions contemplated by this Agreement. If, at any time after the Payment Date, any further action is necessary or desirable to carry out the purposes of this Agreement, the Put Member shall use its commercially reasonable efforts to take any such action. The Put Member shall use its commercially reasonable efforts not to take any action, or enter into any transaction, that would cause any of its representations or warranties contained in this Agreement to be untrue or result in a breach of any covenant made by it in this Agreement.

Notwithstanding anything to the contrary contained in this Section 5, if at the time of the delivery of the Put Notice or at any time thereafter prior to the Payment Date, any Affiliate of PMB (including, without limitation, PMBRES) shall then be providing any property management services or asset management services to Terrace or with respect to the Property, then the Put Member shall not be deemed to be responsible for performing the covenants set forth in Sections 5.2 and 5.3 hereof, solely to the extent relating to the period during which such Affiliate of PMB provided such services.

6. Operating Covenants. From and after the Effective Date and continuing through the earlier of (x) the expiration or earlier termination of this Agreement or (y) the Payment Date, the Put Member covenants and agrees to:

6.1 Cause Terrace to operate, lease, manage, insure and maintain the Property in a commercially reasonable manner (understanding that at all times the Property will be operated, leased and managed in such a way that (a) does not prevent Nationwide Health Properties, Inc. (“NHP”) from being taxed as a real estate investment trust under Sections 856-859 of the Code (as determined by NHP) and (b) unless otherwise determined by NHP, would not result in the recognition of income that is not described in Section 856(c)(2) or Section 856(c)(3) of the Code).

6.2 Cause Terrace to use commercially reasonable efforts to keep in full force and effect, and shall renew, when necessary, all licenses and permits required for the Property;

6.3 Cause Terrace not to permit any default in any material respect, or any event that could give rise to a default in any material respect with lapse of time or notice, to occur under any existing loan secured by the Property or other financing encumbering the Property;

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6.4 Cause Terrace to use commercially reasonable efforts not to be in default in any material respect under any Contracts, Leases or any other agreements affecting the Property;

6.5 Cause Terrace to pay all debts of Terrace when due and payable (unless and to the extent being contested in good faith); and

6.6 Cause Terrace to pay all Taxes related to Terrace and the Property when due and payable (unless and to the extent being contested in good faith).

7. PMB’s Covenants. In addition to the covenants and agreements of PMB set forth elsewhere in this Agreement, PMB covenants and agrees that during the Term:

7.1 Act in Good Faith. PMB shall deal with the Put Member fairly, reasonably and in good faith and shall not unreasonably withhold, condition or delay its consent in any situation in which this Agreement calls for consent.

7.2 Notice of Change in Circumstances. PMB shall promptly notify the Put Member of any Changes in any condition or event or circumstance of which PMB obtains knowledge subsequent to the Effective Date which (a) materially affects PMB or the Put Right, (b) makes any representation or warranty of PMB under this Agreement untrue or misleading in any material respect or (c) makes any covenant or agreement of PMB under this Agreement incapable or substantially less likely of being performed, it being expressly understood that the obligation to provide information under this Section 7.2 shall in no way relieve PMB or the Guarantors of any liability for a breach of its representations, warranties, covenants or agreements under this Agreement. If PMB becomes aware after the Effective Date of any Changes that (i) make any representation or warranty of PMB or of any of the Guarantors under this Agreement (which was true, correct and complete as of the Effective Date) untrue, incorrect or incomplete or (ii) make any covenant or agreement of PMB or of any of the Guarantors under this Agreement (which was, as of the Effective Date, capable of being performed) incapable or substantially less likely of being performed, to the extent that such Changes are not the result of PMB’s (or any of its Affiliates’) breach of this Agreement, such Changes shall not constitute a default by PMB hereunder and PMB shall have no liability to the Put Member with respect thereto, but PMB shall promptly notify the Put Member of such Changes; provided, however, that the Put Member shall continue to have the remedies set forth in Section 12 hereof and the Guarantors shall continue to be liable to fully perform the obligations set forth in Section 10 hereof.

7.3 Further Action, Reasonable Efforts. Upon the terms and subject to the conditions hereof, PMB shall use its reasonable efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, using its reasonable efforts to obtain all licenses, permits, consents, approvals, authorizations, certificates, qualifications and orders of, and make all filings and required submissions with, all Federal, state and local governmental and regulatory agencies, authorities, commissions and instrumentalities, and all partners of, and

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parties to contracts with, any of PMB, the Put Member or Terrace, in each case, as are necessary or desirable for the consummation of the transactions contemplated by this Agreement. If, at any time after the Payment Date, any further action is necessary or desirable to carry out the purposes of this Agreement, PMB shall use its commercially reasonable efforts to take any such action. PMB shall use its commercially reasonable efforts not to take any action, or enter into any transaction, that would cause any of its representations or warranties contained in this Agreement to be untrue or result in a breach of any covenant made by it in this Agreement.

7.4 Assignment of Membership Interests. On the Payment Date, PMB shall execute and deliver two (2) original assignment and assumption agreements with respect to the Put Interests in the form of Exhibit C-2 attached to the Formation and Contribution Agreement (the “Membership Assignment”).

8. PMB’s Conditions Precedent. The obligation of PMB to pay the Purchase Price hereunder is subject to the following conditions precedent (“PMB’s Conditions Precedent”), which may be waived, or the time for satisfaction thereof extended, by PMB only in a writing executed by PMB:

8.1 Put Member’s Due Performance. All of the representations and warranties of the Put Member set forth in this Agreement shall be true, correct and complete in all material respects as of the date of the Put Notice and the Payment Date, and the Put Member, on or prior to the Payment Date, shall have materially complied with and/or performed all of the obligations, covenants and agreements required on the part of the Put Member to be complied with or performed pursuant to the terms of this Agreement.

8.2 Bankruptcy. No action or proceeding shall have been commenced by or against the Put Member or Terrace under the federal bankruptcy code or any state law for the relief of debtors or for the enforcement of the rights of creditors and no attachment, execution, lien or levy shall have attached to or been issued with respect to any of the Put Member’s interest in the Put Interests or any portion thereof.

8.3 Lender’s Approval. Allianz Life Insurance Company of North America, a Minnesota corporation (“Allianz”), is the current holder of a mortgage encumbering the Property as collateral security for the repayment of indebtedness procured by Terrace from Allianz to finance Terrace’s construction, development and/or operations on the Property (herein, “Allianz Mortgage Indebtedness”). Subject to the terms and conditions contained in that certain Loan Assumption Agreement, dated as of October     , 2008, by and between Allianz, Terrace and the New Guarantors (as defined therein) (the “Assumption Agreement”), Allianz has consented to the transfer of the Put Interests to a Permitted Transferee (as defined in the Assumption Agreement). If the Put Member desires to refinance the Allianz Mortgage Indebtedness with indebtedness from a new lender, such new lender must first provide its prior consent to the consummation of the transactions contemplated under this Agreement in accordance with the terms and conditions hereof. It is a condition precedent to PMB’s obligation to pay the Purchase Price that such consent be obtained before Terrace procures such indebtedness. If the Put Member fails to obtain such consent, the Put Member may elect to cause Terrace to sell the

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Property in accordance with the terms and conditions contained in the Operating Agreement and subject to the Put Right and the limitations set forth therein.

8.4 Non-Foreign Affidavit. On the Payment Date, the Put Member shall deliver to PMB a non-foreign affidavit in a form reasonably acceptable to PMB, executed by the Put Member, together with any comparable state required affidavits and forms required by the State of Nevada.

8.5 Statement of Representations and Covenants. On the Payment Date, the Put Member shall deliver to PMB an updated representation certificate (the “Payment Date Statement”), pursuant to which the Put Member shall provide, and represent and warrant to PMB that (a) each of the representations and warranties set forth in Section 4 hereof (including an updated Contracts Schedule and Rent Roll, if necessary) are true and correct as of the Payment Date, subject to the provisions of the last sentence of Section 4 hereof, (b) to the knowledge of the Put Member, the Put Member has complied with and/or performed all of the obligations, covenants and agreements required on the part of the Put Member to be complied with or performed pursuant to Sections 5 and 6 hereof, subject to the provisions of the last sentence of Section 5 hereof, and (c) to the knowledge of the Put Member, no Termination Event has occurred.

8.6 Assignment of Membership Interests. On the Payment Date, the Put Member shall execute and deliver two (2) originals of the Membership Assignment.

8.7 Litigation. As of the Payment Date, there are no actions, investigations, suits or proceedings pending or, to the knowledge of Operating Partnership, threatened against or affecting Operating Partnership, the Put Interests, Terrace or the Property, which would be reasonably expected to have a material adverse impact on the business or assets of Terrace or the Property, if adversely determined.

If any of PMB’s Conditions Precedent have not been fulfilled within the applicable time periods, PMB may, at its election and in its sole and absolute discretion: (a) waive such condition and close in accordance with this Agreement; or (b) delay paying the Purchase Price until such time as each of PMB’s Conditions Precedent have been satisfied; provided, however, that if PMB’s Conditions Precedent have not been satisfied within one hundred eighty (180) days after the delivery of the Put Notice, such Put Notice shall be deemed to be automatically rescinded by the Put Member and of no further force or effect. The Parties acknowledge and agree that a rescission of a Put Notice pursuant to item (b) of the preceding sentence shall not terminate the Put Right and the Put Member shall continue to have a right to deliver additional Put Notices during the Term in accordance with Section 1.1 hereof, but only to the extent that a Put Event occurs subsequent to such rescission.

9. Termination Event. As used herein, “Termination Event” shall mean that the Put Member has taken, or has permitted Renown (or any successor-in-interest to Renown) to have taken, any of the following actions without PMB’s prior written consent (which shall not be unreasonably withheld, conditioned or delayed), at any time during the Term:

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9.1 materially amend or modify the Operating Agreement;

9.2 materially amend or modify the Ground Lease;

9.3 issue, sell, pledge or dispose of, grant or otherwise create, or agree to issue, sell, pledge or dispose of, grant or otherwise create any membership interests, or any debt or any securities convertible into or exchangeable for membership interests in Terrace;

9.4 except as permitted by the Operating Agreement, purchase, redeem or otherwise acquire or retire, or offer to purchase, redeem or otherwise acquire or retire any membership interests in Terrace (including any options with respect to its membership interests and any security convertible or exchangeable into its membership interests);

9.5 permit Terrace to incur or become contingently liable with respect to any indebtedness or guarantee any such indebtedness or issue any debt securities or incur any obligation or liability, except in the ordinary course of business;

9.6 permit Terrace to adopt a plan of complete or partial liquidation, merger, consolidation, restructuring, recapitalization or other reorganization;

9.7 permit Terrace to acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or any portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business entity;

9.8 permit Terrace to make any loan to any person, except in the ordinary course of business;

9.9 take any action which would materially adversely affect the ability of the parties to consummate the transactions contemplated by this Agreement;

9.10 except as permitted by the Operating Agreement, admit any additional members to Terrace as Substitute Members or otherwise, (other than Affiliates of Members);

9.11 if the Put Member’s consent is required under the Operating Agreement, permit any transfer of Renown’s or any other Hospital Member’s Membership Interest or Economic Interest without the Put Member’s prior consent;

9.12 cause the Put Member to cease serving as the Managing Member of Terrace;

9.13 permit Terrace to make any material tax election;

9.14 take any action which could cause Terrace to be treated as an association taxable as a corporation; or

9.15 authorize any of, or commit or agree to take any of, the foregoing actions.

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10. Guarantee.

10.1 Guaranteed Obligations. The Guarantors hereby irrevocably and unconditionally guarantee, as primary obligors and not merely as sureties, the performance of all obligations of PMB under this Agreement, including, without limitation, the due and punctual payment by PMB in full of the Purchase Price to be paid pursuant to this Agreement (collectively, the “Guaranteed Obligations”).

10.2 Certain Waivers. To the fullest extent permitted by applicable law, each of the Guarantors waive presentment to, demand of payment from and protest to the Put Member, and also waive notice of acceptance of the guarantee pursuant to this Section 10 and notice of protest for non-payment. To the fullest extent permitted by applicable law, the obligations of each of the Guarantors hereunder shall not be affected by the failure of the Put Member to assert any claim or demand or to exercise or enforce any right or remedy against PMB under the provisions of this Agreement or otherwise.

10.3 Guarantee Absolute. Each of the Guarantors agrees that the guarantee pursuant to this Section 10 constitutes an absolute, unconditional, present and continuing guarantee of payment and not of collection, and waives any right to require that any resort be had by the Put Member (a) against PMB or any other Person for the Guaranteed Obligations or (b) against any other right or remedy available to the Put Member by contract, applicable law or otherwise. It is the intent of the guarantee pursuant to this Section 10 that the Put Member shall have resort to each of the Guarantors without asserting or resorting to any remedy against PMB or any other Person and without demand to it, as though each of the Guarantors was primarily liable for any of the Guaranteed Obligations.

10.4 Additional Waivers. Without limiting the foregoing, each of the Guarantors hereby waives and relinquishes all rights and remedies now or hereafter accorded by applicable law to sureties and/or guarantors or any other accommodation parties, under any statutory provision, common law or any other provision of law, custom or practice, and agrees not to assert or take advantage of any such rights or remedies, including, without limitation, (a) any right to require the Put Member to proceed against PMB or any other Person or to proceed against or exhaust any security held by the Put Member at any time or to pursue any other remedy in the Put Member’s power before proceeding against each of the Guarantors; (b) any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of PMB or any other Person, or any defect in the formation of PMB or any other Person; (c) any defense that may arise by reason of the incapacity, lack of authority, insolvency, bankruptcy, death or disability of PMB or any other guarantor (including any of the Guarantors) or other Person or the failure of the Put Member to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of PMB or any other guarantor (including any of the Guarantors) or other Person; (d) notice of the existence, creation or incurring of any new or additional indebtedness or obligation of PMB under this Agreement or of any action or non-action on the part of PMB under this Agreement or in connection with any Guaranteed Obligation; (e) any defense based upon an election of remedies by the Put Member which destroys or otherwise impairs any subrogation rights of any of the Guarantors or any right of any of the Guarantors to proceed against PMB or any other Person for reimbursement, or

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both; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (g) any duty on the part of the Put Member to disclose to each of the Guarantors any facts the Put Member may now or hereafter know about PMB, regardless of whether the Put Member has reason to believe that any such fact materially increases the risk beyond that which each of the Guarantors intends to assume or has reason to believe that any such fact is unknown to the Guarantors or has a reasonable opportunity to communicate such fact to the Guarantors, it being understood and agreed that each of the Guarantors is fully responsible for being and keeping informed of the financial condition of PMB and of all circumstances bearing on the risk of non payment or non-performance of any Guaranteed Obligation; (h) any defense arising because of the Put Member’s election, in any proceeding instituted under the federal Bankruptcy Code; (i) any defense based upon the validity or enforceability of this Agreement; (j) all rights to insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshaling of assets, redemption or similar law or requirement, which may delay, prevent or otherwise affect the performance by any of the Guarantors of any of the Guaranteed Obligations; (k) diligence, presentment and demand; (l) any requirement to mitigate any damages resulting from any default under this Agreement; and (m) any defense based on any borrowing or grant of a security interest under Section 364 of the federal Bankruptcy Code.

10.5 Representations and Warranties by the Guarantors. Each of the Guarantors makes the following representations and warranties to the Put Member as of the Effective Date:

(a) Such Guarantor is benefiting from the transactions contemplated under this Agreement and the Formation and Contribution Agreement;

(b) Such Guarantor is an individual and has full power, authority and legal right to execute and to deliver and to perform and observe the obligations and provisions of this Section 10;

(c) This Agreement has been duly authorized, executed and delivered by such Guarantor, and the provisions of this Section 10 constitute the valid and binding obligations of such Guarantor, enforceable against such Guarantor in accordance with the terms hereof, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law); and

(d) No consent, approval or other authorization of any spouse, nor any consent, approval or other authorization, or registration, declaration or filing with, any governmental authority, is required for the due execution and delivery by such Guarantor of this Agreement, or for the performance by or the validity or enforceability hereof against such Guarantor.

11. Indemnification.

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11.1 By PMB. PMB hereby agrees to indemnify, protect, defend and hold the Put Member harmless from and against any and all claims, demands, actions, causes of action, judgments, obligations, contracts, agreements, debts and liabilities whatsoever, whether known or unknown, suspected or unsuspected, both at law and in equity (“Claims”) arising out of or in connection with (a) the breach of any of PMB’s representations or warranties set forth herein (subject to the survival limitations set forth in Section 3.4 hereof), (b) the breach of any of PMB’s covenants or agreements set forth herein or (c) the ownership of the Put Interests arising after the Payment Date, including, without limitation any liabilities for any Taxes, that relate to Terrace or the Put Interests to the extent relating to the period from and after the Payment Date, except to the extent prorated pursuant to this Agreement.

11.2 By Operating Partnership. Operating Partnership hereby agrees to indemnify, protect, defend and hold PMB and its assignee(s) or designee(s), if applicable, harmless from and against any Claims arising out of or in connection with (a) the breach of the Put Member’s representations or warranties set forth herein (subject to the survival limitations set forth in Section 4.17 hereof), (b) the breach of any of the Put Member’s covenants or agreements set forth herein, (c) the ownership of the Put Interests arising after the Effective Date and prior to the Payment Date, or (d) any fraud or willful misconduct by the Put Member. In addition, Operating Partnership hereby agrees to indemnify, protect, defend and hold PMB harmless from any liabilities (other than (1) its “Permitted Entity Liabilities” (as defined in the Formation and Contribution Agreement) or (2) liabilities to the extent that such liabilities are the responsibility or liability of Renown), including, without limitation any liabilities for any Taxes, that relate to Terrace or the Put Interests to the extent relating to the period from and after the Effective Date and prior to the Payment Date, except to the extent prorated pursuant to this Agreement.

11.3 Interpretation. Notwithstanding anything to the contrary contained herein, no Party shall be entitled to any recovery of damages pursuant to this Section 11 to the extent that the Party seeking indemnification hereunder had knowledge as of the Payment Date of the matter that gives rise to the Claims, including the breach by any Party of any of its representations, warranties, covenants or agreements set forth in this Agreement that give rise to such Claims. In addition, and notwithstanding anything to the contrary contained herein, the indemnification provisions of this Section 11 (subject to the guarantee set forth in Section 10 hereof and the remedies set forth in Section 12 hereof) shall be the sole remedy of an indemnified party and shall be in lieu of any other remedy available to any indemnified party, whether at law or in equity, arising out of or in connection with a Claim for which an indemnified party is entitled to indemnification hereunder, including, without limitation, on account of any breach by any party of any of its representations, warranties, covenants or agreements set forth in this Agreement that give rise to such Claims.

11.4 Limitations and Indemnity. Notwithstanding anything to the contrary in this Agreement (other than with respect to the PMB’s Claims arising out of or in connection with the matters described in clauses (c) and (d) and the last sentence of Section 11.2 hereof, for which the Parties hereby agree that the limitations set forth in this sentence shall not apply), PMB shall not seek, or be entitled to, indemnification or any other action, whether in law or in equity, for a breach of any express representation, warranty, covenant or obligation of the Put Member under

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this Agreement (a) to the extent the aggregate Claims for damages or losses for which indemnification is sought pursuant to Section 11 hereof or any other claim for breach of any other express representation, warranty, covenant or obligation of the Put Member under this Agreement is less than $50,000 or (b) to the extent the aggregate Claims for damages or losses (excluding any Claims arising out of or in connection with the matters described in clauses (c) and (d) and the last sentence of Section 11.2 hereof) exceed an amount equal to three percent (3%) of the Agreed Value. In calculating the amount of any damages payable to PMB hereunder, the amount of the damages (A) shall not be duplicative of any other award for any indemnification claim or other claim for breach of any express representation, warranty, covenant or obligation of the Put Member under this Agreement, and (B) shall be computed net of any amounts actually recovered by PMB under any insurance policy with respect to such damages.

11.5 Further Assurances. Each Party shall do, execute and deliver, or shall cause to be done, executed and delivered, all such further acts and instruments which the other party may reasonably request in order to more fully effectuate the indemnifications provided for in this Section 11.

11.6 Survival. The provisions of this Section 11 shall survive the Payment Date.

12. Failure to Close by PMB. In the event that the closing of the purchase of the Put Interests following the Put Member’s exercise of the Put Right as contemplated by this Agreement does not occur by reason of any default by PMB of its obligations under this Agreement, then the Put Member shall be entitled to pursue all remedies available at law or in equity, including enforcement of the terms of Section 10 hereof and an action for specific performance, subject to the last sentence of this Section 12. Notwithstanding anything contained herein to the contrary, the Put Member acknowledges and agrees that no breach under this Agreement shall result in a default by PMB under this Agreement unless written notice of such breach has been given to PMB, and PMB fails to cure such breach within five (5) Business Days after its receipt of such notice. The Put Member expressly waives any right to recover any and all consequential damages, punitive damages and exemplary damages, and any other damages which would be predicated in whole or in part upon loss of bargain, opportunity lost, or any loss of anticipated benefits incurred by Put Member.

13. Inspections. At all reasonable times during the period commencing on the date of delivery of the Put Notice and ending on the Payment Date, PMB, its agents and representatives shall be entitled at PMB’s sole cost and expense, to enter onto the Property during normal business hours and upon at least forty eight (48) hours’ advance written notice to Operating Partnership, to perform inspections and investigations of the Property and the books and records of Terrace.

14. Miscellaneous.

14.1 Governing Law. This Agreement and the legal relations between the parties hereto shall be governed by and construed and enforced in accordance with the laws of the State of California, without regard to its principles of conflicts of laws.

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14.2 Construction. The Operating Partnership, PMB and each Guarantor intend that this Agreement shall be construed as if all parties prepared this Agreement.

14.3 Entire Agreement. This Agreement, the instruments called for herein, and the Formation and Contribution Agreement (and the applicable agreements referenced therein), constitute the entire agreement between the Put Member and PMB pertaining to the subject matter hereof and supersedes all prior agreements, understandings, letters of intent, negotiations and discussions, whether oral or written, of the Parties, and there are no warranties, representations or other agreements, express or implied, made to any Party by any other Party in connection with the subject matter hereof except as specifically set forth herein or in the documents delivered pursuant hereto or in connection herewith.

14.4 Modification; Waiver. No supplement, modification, waiver or termination of this Agreement shall be binding on any Party unless executed in writing by the Party to be bound thereby. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

14.5 Notices. All notices, consents, requests, reports, demands or other communications hereunder (collectively, “Communications”) shall be in writing and may be given personally, by registered or certified mail, by electronic communication, telecopy or by Federal Express (or other reputable overnight delivery service) as follows:

To Operating Partnership:	c/o Nationwide Health Properties, Inc.
	610 Newport Center Drive, Suite 1150 Newport Beach, California 92660
	Attention: Doug Pasquale
	Telephone: (949) 718-4400
	Telecopy: (949) 759-6887
	Email: doug@nhp-reit.com
With a Copy To:	Nationwide Health Properties, Inc.
	610 Newport Center Drive, Suite 1150 Newport Beach, California 92660
	Attention: Abdo Khoury
	Telephone: (949) 718-4413
	Telecopy: (949) 759-6887
	Email: abdo@nhp-reit.com
With A Copy To:	Skadden, Arps, Slate, Meagher & Flom LLP
	300 South Grand Avenue, Suite 3400 Los Angeles, California 90071
	Attention: Meryl K. Chae, Esq.
	Telephone: (213) 687-5035

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	Telecopy: (213) 621-5035
	Email: mchae@skadden.com
To PMB:	c/o Pacific Medical Buildings
	12348 High Bluff Drive, Suite 100 San Diego, California 92130
	Attention: Mark D. Toothacre
	Telephone: (858) 794-1900
	Telecopy: (858) 794-1910
	Email: mark@pmbllc.com
With A Copy To:	Pacific Medical Buildings
	12348 High Bluff Drive, Suite 100 San Diego, California 92130
	Attention: Evan Stone
	Telephone: (858) 794-1900 x313
	Telecopy: (858) 794-1910
	Email: evan@pmbllc.com
With A Copy To:	Latham & Watkins LLP
	650 Town Center Drive, 20th Floor Costa Mesa, California 92626-1925
	Attention: David C. Meckler
	Telephone: (714) 755-8103
	Telecopy: (714) 755-8290
	Email: david.meckler@lw.com

or to such other address or such other person as the addressee party shall have last designated by notice to the other parties. All Communications shall be deemed to have been given when received. All Communications given by telecopy or electronic communication shall be followed by the delivery of a hard copy of such Communication, provided that such Communications shall be deemed to have been given when received by telecopy or electronic communication.

14.6 Expenses. All fees and expenses incurred by any Party hereto in connection with this Agreement shall be borne by such Party.

14.7 Assignment. Neither the Parties nor any of the Guarantors shall have the right, power, or authority to assign all or any portion of this Agreement or its respective rights hereunder or to delegate any duties or obligations arising under this Agreement, voluntarily, involuntarily or by operation of law, without the prior written consent of each of the other Parties hereto; provided, however, that: (a) PMB shall have the right, power and authority to (i) designate one or more Affiliates to take title to the Put Interests (provided that no such assignment, delegation or designation shall relieve PMB of its obligations or liabilities under this Agreement or any of the documents to be delivered in connection herewith, nor shall any of the Guarantors be released from the guarantee of the Guaranteed Obligations pursuant to Section 10 hereof, and upon the Put Member’s request, each of PMB and the Guarantors shall reaffirm such

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obligations and guarantees at the time of such election) and (ii) assign its rights and obligations under this Agreement to any Affiliate of PMB or to any third party who assumes PMB’s rights and obligations hereunder (provided that no such assignment, delegation or designation shall relieve PMB of its obligations or liabilities under this Agreement or any of the documents to be delivered in connection herewith, nor shall any of the Guarantors be released from the guarantee of the Guaranteed Obligations pursuant to Section 10 hereof, and upon the Put Member’s request, each of PMB and the Guarantors shall reaffirm such obligations and guarantees at the time of such election); and (b) Operating Partnership (and each Put Member) shall have the right, power and authority to assign its rights (and related obligations) hereunder to any Affiliate who is a successor-in-interest to Operating Partnership (or the Put Member) under the Operating Agreement with respect to the Put Interests (provided that no such assignment, delegation or designation shall relieve Operating Partnership of its obligations or liabilities under this Agreement or any of the documents to be delivered in connection herewith, and upon PMB’s request, Operating Partnership shall reaffirm such obligations at the time of such election). The Parties acknowledge and agree that neither a change in control of Operating Partnership nor a change in control of PMB shall be deemed to be a prohibited assignment hereunder and shall in no way affect the obligations of the other Parties or the Guarantors hereunder.

14.8 Severability. Any provision or part of this Agreement which is invalid or unenforceable in any situation in any jurisdiction shall, as to such situation and such jurisdiction, be ineffective only to the extent of such invalidity and shall not affect the enforceability of the remaining provisions hereof or the validity or enforceability of any such provision in any other situation or in any other jurisdiction.

14.9 Successors and Assigns; Third Parties. Subject to and without waiver of the provisions of Section 14.7 hereof, all of the rights, duties, benefits, liabilities and obligations of the Parties shall inure to the benefit of, and be binding upon, their respective successors and assigns. Except as specifically set forth or referred to herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any Person or entity, other than the Parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Agreement.

14.10 Interpretation. All references herein to Articles, Sections, subparagraphs, Exhibits and addenda shall be deemed to be references to Articles, Sections and subparagraphs of, and Exhibits and addenda to, this Agreement unless the context shall otherwise require. All Exhibits and addenda attached hereto shall be deemed incorporated herein as if set forth in full herein. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The term “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.” The words “date hereof” shall refer to the Effective Date. All accounting terms not defined in this Agreement shall have the meanings determined by GAAP as in effect from time to time. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise expressly provided herein, any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is

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referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.

14.11 Counterparts. This Agreement may be executed in as many counterparts as may be deemed necessary and convenient, and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument.

14.12 Headings. The Section headings of this Agreement are for convenience of reference only and shall not be deemed to modify, explain, restrict, alter or affect the meaning or interpretation of any provision hereof.

14.13 Time of Essence. Time shall be of the essence with respect to all matters contemplated by this Agreement.

14.14 Further Assurances. In addition to the actions recited herein and contemplated to be performed, executed, and/or delivered by the Put Member and PMB, the Put Member and PMB agree to perform, execute and/or deliver or cause to be performed, executed and/or delivered at or after the Payment Date any and all such further acts, instruments, deeds and assurances as may be reasonably required to consummate the transactions contemplated hereby.

14.15 Number and Gender. Whenever the singular number is used, and when required by the context, the same includes the plural, and the masculine gender includes the feminine and neuter genders.

14.16 Attorneys’ Fees. In the event that any Party hereto brings an action or proceeding against any other Party to enforce or interpret any of the covenants, conditions, agreements or provisions of this Agreement, the prevailing Party in such action or proceeding shall be entitled to recover all reasonable costs and expenses of such action or proceeding, including, without limitation, attorneys’ fees, charges, disbursements and the fees and costs of expert witnesses.

14.17 Mandatory Arbitration. Any controversy, dispute, or claim of any nature arising out of, in connection with, or in relation to the interpretation, performance, enforcement or breach of this Agreement, including any claim based on contract, tort or statute (collectively, a “Dispute”), that cannot be resolved by the Parties within thirty (30) days after a Party delivers written notice of such Dispute to the other Party shall first be submitted to mediation between the Parties. In the event that such mediation does not resolve the Dispute within ten (10) Business Days, the Dispute shall be resolved at the written request of any Party by binding arbitration using applicable arbitration procedures of JAMS located in San Diego, California pursuant to California law. The Parties shall attempt to designate one arbitrator from JAMS. If they are unable to do so within thirty (30) days after written demand therefor, then JAMS shall designate an arbitrator. The arbitration shall be final and binding, and enforceable in any court of competent jurisdiction. The arbitrator shall award attorneys’ fees (including those of in-house counsel) and costs to the prevailing party and charge the cost of arbitration to any Party which is

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not the prevailing party. Notwithstanding anything to the contrary contained herein, this Section 14.17 shall not prevent a Party from seeking and obtaining equitable relief on a temporary or permanent basis, including, without limitation, a temporary restraining order, a preliminary or permanent injunction or similar equitable relief, from a court of competent jurisdiction located in the state of California (to which all Parties consent to venue and jurisdiction) by instituting a legal action or other court proceeding in order to protect or enforce the rights of such Party under this Agreement or to prevent irreparable harm and injury. The court’s jurisdiction over any such equitable matter, however, shall be expressly limited only to the temporary, preliminary, or permanent equitable relief sought; all other claims initiated under this Agreement between the parties hereto shall be determined through final and binding arbitration in accordance with the terms of this Section 14.17. Neither the Parties nor the arbitrator shall disclose the existence, content or results of any arbitration hereunder without the prior written consent of all Parties except to the extent necessary to enforce the award; provided, however, that either Party may disclose the existence, content or results of any such arbitration to its partners, officers, directors, employees, agents, attorneys, accountants, lenders and to any other Person to whom disclosure is required by applicable law, including pursuant to an order of a court of competent jurisdiction. The terms and provision of this Section 14.17 shall survive the Payment Date.

14.18 Knowledge Defined. As used in this Agreement, the term “knowledge”, (a) when used with respect to PMB means to the actual, current knowledge of Mark Toothacre, Gregory P. Nelson, Robert A. Rosenthal, James Rohan, Elizabeth Powell, Jeffrey L. Rush, Claude Hooton, Jonathan Hughes and Sherwood Johnston, III (provided that if any of the foregoing individuals is no longer an employee or investor of PMB or an Affiliate of PMB, “knowledge,” with respect to such individual, shall mean the actual, current knowledge of the person who (i) succeeds to such individual’s position with PMB or its Affiliate, as applicable, (ii) holds a substantially similar position with PMB or its Affiliate, as applicable, or (iii) succeeds to the knowledge base of such individual, as reasonably agreed upon by the Parties), without independent investigation or the duty to conduct an independent investigation, and without imputation of the knowledge of any other employees, agents or other advisors of PMB or its affiliates, and (b) when used with respect to Operating Partnership or the Put Member means to the actual, current knowledge of Doug Pasquale, Abdo Khoury, Don Bradley and Bill Wagner (provided that if any of the foregoing individuals is no longer an employee of Operating Partnership or an Affiliate of Operating Partnership, “knowledge,” with respect to such individual, shall mean the actual, current knowledge of the person who (i) succeeds to such individual’s position with Operating Partnership or its Affiliate, (ii) holds a substantially similar position with Operating Partnership or its Affiliate, as applicable, or (iii) succeeds to the knowledge base of such individual, as reasonably agreed upon by the Parties), without independent investigation or the duty to conduct an independent investigation, and without imputation of the knowledge of any other employees, agents or other advisors of Operating Partnership or its affiliates.

[Remainder of Page Left Intentionally Blank. Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto, by the hands of their duly authorized officers, execute this Agreement as of the date first set forth above.

OPERATING PARTNERSHIP:
NHP/PMB L.P., a Delaware limited partnership
By:	NHP/PMB GP LLC, a Delaware limited liability company its General Partner
	By:	NHP Operating Partnership L.P., a Delaware limited partnership its Sole Member
		By:	NHP GP LLC, a Delaware limited liability company its General Partner
			By:	Nationwide Health Properties, Inc., a Maryland corporation Its Sole Member
				By:
					Name:
					Title:

PMB:
PMB LLC, a California limited liability company
By:	PMB, Inc. a California corporation its Manager
	By:
		Name:	Mark Toothacre
		Title:	President

[Signatures Continue on Following Page]

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Solely with respect to the guaranty by the Guarantors of the Guaranteed Obligations contained in Section 10 and the provisions of Section 14.7 hereof:

GUARANTORS:

JEFFREY L. RUSH, an individual

KIMBERLY B. COCHRANE, an individual

ROBERT A. ROSENTHAL, an individual

EVAN M. STONE, an individual

JOHN HUSSEY III, an individual

MARK D. TOOTHACRE, an individual

ELIZABETH A. POWELL, an individual

GREG NELSON, an individual

JIM ROHAN, an individual

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EXHIBIT “D”

FORM OF CROSS-INDEMNITY AGREEMENT

See attached.

D-1

CROSS-INDEMNITY AGREEMENT

THIS CROSS-INDEMNITY AGREEMENT (this “Indemnity”) is entered into effective as of                      (the “Effective Date”) by NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (“NHP”), and NHP/PMB L.P., a Delaware limited partnership (the “Operating Partnership” and, together with NHP, the “Indemnitors”), in favor of JEFFREY L. RUSH, an individual; MARK D. TOOTHACRE, an individual; ELIZABETH A. POWELL, an individual; KIMBERLY B. COCHRANE, an individual; ROBERT A. ROSENTHAL, an individual; EVAN M. STONE, an individual (each, a “Guarantor”, and collectively, the “Guarantors”).

RECITALS

A. WHEREAS, Allianz Life Insurance Company of North America, a Minnesota corporation (“Lender”), made a loan (the “Loan”) to The Terrace at South Meadows, LLC, a Nevada limited liability company (“Original Borrower”), evidenced by that certain Secured Installment Note dated May 10, 2005 in the original principal amount of Eight Million Eight Hundred Fifty Thousand Dollars ($8,850,000.00) (the “Note”);

B. WHEREAS, the repayment of the Loan is secured in part by (i) a Leasehold Deed of Trust, Security Agreement, Fixture Filing with Absolute Assignment of Rents dated May 10, 2005, granted by Original Borrower to the trustee named therein for the benefit of Lender and recorded May 10, 2005 in the office of the Recorder of Washoe County, Nevada as Document No. 3211343 (the “Deed of Trust”), which encumbers certain real property in Washoe County, State of Nevada described more particularly on Exhibit A attached hereto and made a part hereof (the “Property”) and (ii) that certain Absolute Assignment of Leases, Rents and Income dated May 10, 2005 from Original Borrower, as assignor, to Lender, as assignee, which also encumbers the Property, recorded May 10, 2005 as Document No. 3211344 (the “Absolute Assignment of Leases, Rents and Income”);

C. WHEREAS, certain of Original Borrower’s obligations under the Loan are guaranteed by Jeffrey L. Rush, an individual (in such capacity, the “Original Guarantor”) under that certain Limited Guaranty dated May 10, 2005, given by Original Guarantor to Lender (“Original Guaranty”);

D. WHEREAS, in connection with the Loan, Original Borrower and Original Guarantor, executed and delivered that certain Environmental Indemnity Agreement dated May 10, 2005 (the “Environmental Indemnity”), with respect to the Property;

E. WHEREAS, on or before the date hereof, Original Borrower has converted to a Delaware limited liability company named “The Terrace at South Meadows, LLC” (the “New Borrower”);

F. WHEREAS, pursuant to that certain Formation and Contribution

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Agreement and Joint Escrow Instructions, dated as of February 25, 2008 (the “Original Contribution Agreement”), as amended by that certain First Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 10, 2008 (the “First Amendment”), as further amended by that certain Letter Agreement Re: Due Diligence Waiver Letter and Second Amendment to that certain Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 14, 2008 (the “Second Amendment”), as further amended by that certain Third Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 26, 2008 (the “Third Amendment”), as further amended by that certain Fourth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of March 28, 2008 (the “Fourth Amendment”), as further amended by that certain Fifth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of April 22, 2008 (the “Fifth Amendment”), as further amended by that certain Sixth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated May 12, 2008 (the “Sixth Amendment”), as further amended by that certain Seventh Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of June 24, 2008 (the “Seventh Amendment”), as further amended by that certain Eighth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of July 25, 2008 (the “Eighth Amendment”), as further amended by that certain Ninth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of August 27, 2008 (the “Ninth Amendment”), and as further amended by that certain Tenth Amendment to Formation and Contribution Agreement and Joint Escrow Instructions, dated as of October     , 2008 (the “Tenth Amendment”, and together with the Ninth Amendment, the Eighth Amendment, the Seventh Amendment, the Sixth Amendment, the Fifth Amendment, the Fourth Amendment, the Third Amendment, the Second Amendment, the First Amendment and the Original Contribution Agreement, the “Contribution Agreement”), PMB South Meadows LLC, a Nevada limited liability company, is conveying its fifty percent (50%) membership interest in New Borrower to NHP/PMB L.P., a Delaware limited partnership (“NHP/PMB”);

G. WHEREAS, pursuant to that certain Loan Assumption Agreement dated as of the date hereof, between New Borrower, Guarantors and Lender (the “Assumption Agreement”), New Borrower is assuming all of Original Borrower’s obligations under the Loan Documents (as hereinafter defined);

H. WHEREAS, pursuant to the Assumption Agreement, Lender is releasing Original Guarantor from any and all liabilities and/or obligations under the Note, the Original Guaranty, the Deed of Trust, the Absolute Assignment of Leases, Rents and Income, and the Environmental Indemnity (collectively, the “Loan Documents”) which are first occurring or arising after the Effective Date;

I. WHEREAS, in consideration of the foregoing, (i) Guarantors have executed that certain Limited Guaranty dated as of the date hereof in favor of Lender, to guarantee certain obligations of New Borrower with respect to the Loan and (ii) New Borrower and Guarantors have executed an Environmental Indemnity Agreement dated as of the date hereof in favor of Lender indemnifying Lender against loss as more specifically set forth therein;

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J. WHEREAS, the Indemnitors will derive financial benefits from the assumption of the Loan by New Borrower.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and for other good, valuable and adequate consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:

1. Indemnity Obligations. The Indemnitors hereby agree to jointly and severally, indemnify and hold harmless the Guarantors from and against any costs, losses, damages, claims, liabilities, demands, judgments, penalties and legal or other expenses (including, without limitation reasonable attorneys’ fees and expenses), arising out of or related to the Guarantors’ obligations under the Loan Documents to the extent first occurring or accruing under from and after the Effective Date (the “Indemnification”).

2. Waivers. The Indemnitors hereby waive with respect to the Indemnification, to the maximum extent permitted by applicable law (a) all rights under any law limiting remedies; (b) all rights under any law to require the Guarantors to pursue any other person or any other remedy before proceeding against the Indemnitors; (c) all rights of reimbursement or subrogation with respect to the Guarantors; (d) all rights to require the Guarantors to give any notices of any kind, including, without limitation, notices of nonpayment, nonperformance, protest, dishonor, default, delinquency or acceleration, or to make any presentments, demands or protests; (e) all rights to assert the bankruptcy or insolvency of any person as a defense hereunder or as the basis for rescission hereof; (f) all defenses based on the disability or lack of authority of any Indemnitor or any other person; (g) the repudiation of the Loan Documents by New Borrower or any person, the failure by the Guarantors to enforce any claim against any person, or the unenforceability in whole or in part of any Loan Documents; (h) all suretyship and guarantor’s defenses generally; (i) all rights to insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshaling of assets, redemption or similar law, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by the Indemnitors of their obligations under, or the enforcement by the Guarantors of, this Indemnity; and (j) any requirement on the part of the Guarantors to mitigate the damages resulting from any default.

3. Term of Indemnity. The term of the Indemnification provided by the Indemnitors in favor of the Guarantors in this Indemnity will commence on the Effective Date hereof and continue until such date as any action covered by the Indemnification is absolutely barred by the applicable statute of limitations.

4. No Modification. No modification, waiver, amendment, discharge or change of this Indemnity shall be valid unless the same is in writing and signed by the party against which the enforcement of such modification, waiver or amendment, discharge or change is or may be sought.

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5. Governing Law. This Indemnity shall be governed and construed in accordance with the laws of the State of Nevada, without regard to any principal or rule of law that would require the application of the law of any other jurisdiction.

6. Notices. Any notice or submittal required or permitted to be given hereunder shall be in writing, and shall be either (a) personally delivered to the party to whom it is to be sent; (b) sent by overnight courier service (such as Federal Express); (c) sent by U.S. certified or registered mail, return receipt requested, postage prepaid; or (d) sent by electronic communication or telecopy, to the respective addresses of the parties set forth below, or to such other addresses as the parties may specify in writing. Each notice or submittal shall be deemed to have been given on the date of receipt (or refusal to accept delivery) as indicated on the customary receipt used by the delivering service.

If to the Indemnitors:	Nationwide Health Properties, Inc.
	610 Newport Center Drive, Suite 1150 Newport Beach, California 92660
	Attention: Doug Pasquale
	Telephone: (949) 718-4400
	Telecopy: (949) 759-6887
	Email: doug@nhp-reit.com
With a Copy To:	Skadden, Arps, Slate, Meagher & Flom LLP
	300 South Grand Avenue, Suite 3400 Los Angeles, California 90071
	Attention: Meryl K. Chae
	Telephone: (213) 687-5035
	Telecopy: (213) 621-5035
	Email: mchae@skadden.com
If to the Guarantors:	c/o Pacific Medical Buildings LLC
	12348 High Bluff Drive, Suite 100 San Diego, California 92130
	Attention: Mark D. Toothacre
	Telephone: (858) 794-1900
	Telecopy: (858) 794-1910
	Email: mark@pmbllc.com
With a Copy to:	Latham & Watkins LLP
	650 Town Center Drive, 20th Floor Costa Mesa, California 92626-1925
	Attention: David C. Meckler
	Telephone: (714) 755-8103
	Telecopy: (714) 755-8290
	Email: david.meckler@lw.com

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7. Assignment. This Indemnity shall be binding upon and shall inure to the benefit of the parties to this Indemnity and their successors and assigns.

8. Third Parties. Except as specifically set forth or referred to herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties hereto and their successors or permitted assigns, any rights or remedies under or by reason of this Indemnity.

9. Dispute Resolution. Any controversy, dispute, or claim of any nature arising out of, in connection with, or in relation to the interpretation, performance, enforcement or breach of this Indemnity, including any claim based on contract, tort or statute (collectively, a “Dispute”), that cannot be resolved by the parties within thirty (30) days shall first be submitted to mediation between the parties. In the event that such mediation does not resolve the Dispute within ten (10) Business Days, the Dispute shall be resolved at the written request of any party to this Indemnity by binding arbitration using applicable arbitration procedures of JAMS located in San Diego, California pursuant to California law. The parties shall attempt to designate one arbitrator from JAMS. If they are unable to do so within thirty (30) days after written demand therefor, then JAMS shall designate an arbitrator. The arbitration shall be final and binding, and enforceable in any court of competent jurisdiction. The arbitrator shall award attorneys’ fees (including those of in-house counsel) and costs to the prevailing party and charge the cost of arbitration to the party which is not the prevailing party. Notwithstanding anything to the contrary contained herein, this Section 9 shall not prevent the Indemnitors or the Guarantors from seeking and obtaining equitable relief on a temporary or permanent basis, including, without limitation, a temporary restraining order, a preliminary or permanent injunction or similar equitable relief, from a court of competent jurisdiction located in the state of Oregon (to which all parties hereto consent to venue and jurisdiction) by instituting a legal action or other court proceeding in order to protect or enforce the rights of such party under this Indemnity or to prevent irreparable harm and injury. The court’s jurisdiction over any such equitable matter, however, shall be expressly limited only to the temporary, preliminary, or permanent equitable relief sought; all other claims initiated under this Indemnity between the parties hereto shall be determined through final and binding arbitration in accordance with the terms of this Section 9.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Indemnity has been executed as of the date first set forth above.

INDEMNITORS:
NHP:
NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation
By:
Name:
Title:
OPERATING PARTNERSHIP:
NHP/PMB L.P., a Delaware limited partnership
By:	NHP/PMB GP LLC, a Delaware limited liability company, its General Partner
By:	NHP Operating Partnership L.P., a Delaware limited partnership its Sole Member
By:	NHP GP LLC, a Delaware limited liability company, its General Partner
By:	Nationwide Health Properties, Inc. a Maryland corporation, its Sole Member
By:
Name:
Title:

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EXHIBIT A

Description of Property

A leasehold as created by that certain Ground Lease dated February 12, 2003 by and between Washoe Professional Center, Inc., a Nevada corporation, as Landlord, and The Terrace at South Meadows, LLC, a Delaware limited liability company, as successor in interest to The Terrace at South Meadows, LLC, a Nevada limited liability company, as Tenant, as may be amended from time to time, as referenced in the document entitled “Memorandum of Ground Lease” dated February 12, 2003, recorded February 18, 2003 as Document No. 2807198 in the Office of the County Recorder of Washoe County, Nevada, as to Parcel A, and easements as to Parcel B and Parcel C.

PARCEL A:

PARCEL 2 OF MERGER & RESUBDIVISION PARCEL MAP 3929 FOR WASHOE HEALTH SYSTEM, INC., RECORDED NOVEMBER 14, 2002 AS FILE NO. 2763202, OFFICIAL RECORDS, WASHOE COUNTY, NEVADA.

PARCEL B:

EASEMENTS FOR INGRESS, EGRESS AND ACCESS OVER ALL THOSE AREAS SHOWN AS ACCESS EASEMENTS ON PARCEL MAP NO. 3532 FILED IN THE OFFICE OF THE COUNTY RECORDER OF WASHOE COUNTY, STATE OF NEVADA ON JUNE 18, 1999 AS FILE NO. 2352497 OF OFFICIAL RECORDS.

PARCEL C:

AN EASEMENT FOR ACCESS AND UTILITIES AS SET FORTH IN THAT CERTAIN RECIPROCAL ACCESS AND UTILITY EASEMENT RECORDED JANUARY 11, 1994 IN BOOK 3954, PAGE 714 AS DOCUMENT NO. 1752916 OF OFFICIAL RECORDS.

APN: 160-040-16

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EXHIBIT “E”

FORM OF ASSET AND PROPERTY MANAGEMENT AGREEMENT

(SHARP REES-STEALY PROPERTY)

See attached.

Exhibit E-1

ASSET AND PROPERTY MANAGEMENT AGREEMENT

THIS ASSET AND PROPERTY MANAGEMENT AGREEMENT (“Agreement”) is made as of October 31, 2008 (“Effective Date”), by the following parties:

“Owner”:	NHP/PMB Chula Vista LLC
“Agent”:	PMB Real Estate Services LLC
“Property”:	Sharp Rees-Stealy Clinic

Owner designates Agent as the managing Agent for Owner’s Property. Agent accepts this designation and agrees to furnish the services of its organization for the duties as more completely described below and in the attached Addenda:

1. Term of Agreement. The term of this Agreement (“Term”) shall commence on the Effective Date, and terminate ten (10) years after the Effective Date. This Agreement, if not previously renewed in writing for an additional fixed period, may be canceled effective at the end of the Term by either party giving written notice no less than thirty (30) days before the expiration of the Term. If not so canceled, the Term shall automatically be extended for additional terms of twelve (12) calendar months each, which shall be subject to cancellation in accordance with the provisions outlined above.

1.1. Notwithstanding the above, at any time during the Term, Owner may serve written notice to Agent of its intention to cancel this Agreement in whole, or to cancel this Agreement only with respect to the “Asset Management Services” (defined below) or the “Property Management Services” (defined below), in each case, for Cause (defined below), provided written notice is given at least sixty (60) days before the effective date of such cancellation. During the 60 days, Agent may cure the Cause, if capable of being cured, or, if the Cause is incapable of being cured within that time, but can be cured within a reasonable period thereafter, commence to cure it and thereafter diligently pursue to cure it, in which case this Agreement shall not terminate pursuant to such written notice unless Agent fails to diligently cure such Cause within a reasonable period. As used in this Agreement, “Cause” means, while acting as Agent: fraud, bankruptcy, gross negligence, willful misconduct, material adverse default (i.e., after customary notice and opportunity to cure) of Agent, its officers, employees or agents, in all cases having a direct, substantial, and material adverse affect on the Property’s business. Cause will be established only after judicial or arbitral determination, provided that Agent may not cure such Cause following such judicial or arbitral determination unless Owner has consented to the same. As used in this Agreement, “Asset Management Services” means each of Agent’s obligations pursuant to Addendum D attached hereto. As used in this Agreement, “Property Management Services” means each of Agent’s obligations pursuant to Addendum A, Addendum B, and Addendum C attached hereto, as well as Agent’s obligations pursuant to Section 2.1(b)-(d) and Section 5.3 below.

1.2. Notwithstanding the foregoing provisions of this Section 1, this Agreement shall automatically terminate upon: (a) the sale or other transfer by Owner of the Property to an unaffiliated third party bona fide purchaser for value, or (b) the occurrence of a major casualty to the Property so that the Property is no longer in operation and is reasonably expected by Owner to be so for a period of at least eighteen (18) months.

1.3. If this Agreement is terminated in whole or in part, Owner and Agent will cooperate in the timely and coordinated transfer of the applicable management responsibilities and the applicable files, keys, plans, specifications, and such other accountings, books and records relating to the Property. If necessary, Agent shall assign such existing contracts

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relating to the operations and maintenance of the Property as Owner shall require (which by their terms are assignable), provided that Owner or replacement agent shall agree to assume all liability thereunder accruing after the date of assignment.

1.4. If this Agreement is terminated in whole or in part, Agent shall be paid in accordance with the provisions of this Agreement for its performance of the Asset Management Services and/or the Property Management Services, as applicable, prior to the effective date of such termination (or such later date as is mutually agreed upon by the parties hereto). Termination of this Agreement shall release Agent for liability for failure to perform the Asset Management Services and/or the Property Management Services, as applicable, after such termination (provided that such release shall not apply to any provisions hereof which expressly survive termination).

2. Responsibility of Agent. In consideration of the real estate management services to be rendered by Agent under this Agreement, Agent agrees:

2.1. Agent shall use commercially reasonable efforts: (a) in the performance of its duties for the Property in accordance with the obligations and limitations set forth in the attached Addenda, (b) to advise Owner periodically concerning any claims (including insurance claims) involving the Property, (c) to ensure that the Property complies with applicable laws and (d) to operate the Property in a manner that shall not disqualify Owner or its “Affiliates” (defined below) from being taxed as a real estate investment trust under Sections 856-859 of the United States Internal Revenue Code of 1986, as reasonably determined by Owner or its Affiliates (but Agent shall not be responsible to determine such manner, it being Owner’s responsibility to advise Agent thereof in writing from time to time). Agent shall not be obligated to perform such services as not specifically described herein. Agent shall not commence litigation or incur legal fees on Owner’s behalf without Owner’s prior written consent. As used herein, an “Affiliate” of any entity shall mean any entity, company, corporation, limited liability company, limited partnership, general partnership, or joint venture, that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such entity.

2.2. Agent shall maintain accurate records of all funds received and disbursed in connection with Agent’s duties and said records shall be available for Owner’s inspection at reasonable times on receipt of written notice therefore.

2.3. Agent’s accounting records and reports will be provided in Agent’s current standard format (see copy of Agent’s current standard format as of the Effective Date attached hereto as Exhibit A). Owner and Agent may agree to alter the substance and form of reports from Agent to Owner. Notwithstanding the foregoing, Agent shall cooperate with Owner to make such modifications to the reporting format as Owner may reasonably request. Agent shall preserve the same for at least seven (7) years after the close of the calendar year to which they relate. Any person designated by Owner shall have access to such records, accounts and books and all other material pertaining to the Property and its operations during business hours on reasonable notice.

2.4. Agent shall be responsible for costs relating to normal accounting required with respect to Agent’s duties under this Agreement. Owner shall pay for any additional costs or expenses that Agent or its Affiliates incur as a result of compliance with SOX or SEC rules, regulations, or laws with respect to the Property.

2.5. Agent shall be authorized to sign, on Owner’s behalf, tenant leases or rental agreements without Owner’s co-signature, to the extent permitted pursuant to Section 5 of the attached Addendum C.

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3. Responsibilities of Owner. In consideration of the real estate management services to be rendered by Agent under this Agreement, Owner agrees:

3.1. Owner shall, if applicable and if Agent reasonably deems it necessary, promptly furnish Agent with all documents and records as needed by Agent for the efficient management of the Property, including all leases, amendments and correspondence related thereto; the status of rental payments; mortgage loan information and payment instructions; copies of service contracts in effect; and all applicable insurance policies.

3.2. Owner shall promptly provide Agent with all necessary funds for Agent to fulfill its obligations under this Agreement. If Owner has not provided said funds within seven (7) days after Agent’s written request, Agent may, at Agent’s sole option and in addition to all other remedies available to Agent, terminate this Agreement, provided that such termination shall occur prior to Owner’s delivery of such funds. Agent shall not be required to advance funds for Owner’s account.

4. Termination of Property Manager. At any time during the Term, Owner may serve written notice to Agent of its intention to cause Agent to replace the “Property Manager” (defined in Addendum A hereto) due to such person’s failure to perform in a reasonable, professional manner in accordance with industry standards, as reasonably determined by Owner. Agent must replace the Property Manager within sixty (60) days of receiving each such required consent.

5. Insurance and Indemnification. Agent shall not be responsible for the type, amount, or sufficiency of insurance coverage on the Property.

5.1. Except for matters involving Agent’s Cause, Owner shall indemnify, defend, and hold Agent and its members, partners, officers, employees and agents harmless from any and all claims, costs, expenses, demands, attorney’s fees, suits, liabilities, judgments and damages arising from or connected with the management of Property by Agent of the performance or exercise of any of the duties, obligations, powers or authorities granted to Agent under this Agreement; Owner shall promptly reimburse Agent for any monies Agent is required to pay whatsoever for items covered by this Section 5, and such obligation for reimbursement shall survive termination of this Agreement. Owner’s obligations under this Section 5.1 shall survive termination of this Agreement but shall not apply to any claim that relates to acts occurring after the date of termination.

5.2. Agent shall indemnify, defend, and hold Owner and its members, partners, officers, employees and agents harmless from all claims, costs, expenses, demands, attorneys’ fees, suits, liabilities, judgments, and damages arising from or connected with any breach or default by Agent of its obligations under this Agreement which would constitute Cause and entitle Owner to terminate this Agreement. Such obligations of Agent shall: (a) apply without regard to whether this Agreement is actually terminated, and (b) survive termination of this Agreement. In addition, if this Agreement is terminated in whole or in part pursuant to Sections 1.1 above or 7.1 below, Agent shall indemnify, defend, and hold Owner harmless from all claims, costs, expenses, demands, attorneys’ fees, suits, liabilities, judgments, and damages arising from or connected with such termination; provided, however, that the total costs payable by Agent pursuant to this sentence shall not exceed the total amount of fees paid to Agent by Owner hereunder with respect to the Property for the twenty-four (24) month period immediately preceding such termination pursuant to this Agreement.

5.3. Owner shall obtain and maintain insurance for the Property in forms and coverage amounts of at least the forms and coverage amounts as are customary for similar medical office buildings. Agent shall periodically review and coordinate with Owner in matters regarding insurance coverage. Owner and Agent each waives claims for

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recovery against the other to the extent recovered under their respective insurance policies.

5.4. Agent shall carry Worker’s Compensation and employer’s liability insurance at limits no less than statutory requirements where required to do so by law, including employer’s non-owned auto liability insurance. Agent shall comply with all local, State and Federal laws and regulations, including minimum wage laws, applicable to any employees.

5.5. At all times during the continuance of this Agreement all bodily injury, property damage and personal injury insurance carried by Owner on Property shall, without cost to Agent, extend to, insure and indemnify Agent, as well as Owner, by endorsement of such insurance coverage to specifically name Agent as an additional insured.

5.6. Copies of all insurance coverage and endorsements required under this Agreement shall be delivered promptly to each party as required.

6. Termination Accounting. If any payments for Owner’s account are received by Agent after expiration or earlier termination of this Agreement, Agent shall promptly deliver such funds to Owner. If and to the extent there are not sufficient funds in Owner’s account to cover costs relating to the period before such expiration or earlier termination, Owner shall be solely responsible to pay same. Owner shall pay Agent reasonable out-of-pocket expenses incurred by Agent at Owner’s direction after expiration or earlier termination of this Agreement. Within thirty (30) days after expiration or earlier termination of this Agreement, Agent shall deliver to Owner all written reports required with respect to the Property under Section 2.3 above for any period not covered by previously delivered reports up to the time of such expiration or earlier termination.

7. Miscellaneous.

7.1. If a bankruptcy petition is filed by or against either Owner or Agent and is not dismissed within sixty (60) days, or if either makes an assignment for the benefit of creditors or takes advantage of any insolvency act or proceeding, either party may cancel this Agreement on ten (10) days written notice to the other.

7.2. If either party brings an action to enforce or declare rights hereunder or seeks a judicial or arbitral determination of whether Cause may be established, the prevailing party in any such action, on trial, appeal, or otherwise, shall be entitled to reasonable attorneys’ fees to be paid by the losing party.

7.3. This Agreement shall be governed by California law. When the context requires, any gender includes all others, the singular number includes the plural, and vice-versa. Captions are inserted for convenience of reference and do not describe or limit the scope or intent of this Agreement. Any recitals above, and any exhibits or schedules referred to and/or attached hereto, are incorporated by reference into this Agreement. “Person” includes any entity. “Including” means including without limitation. This Agreement contains the entire agreement between the parties regarding its subject matter. Any prior oral or written representations, agreements and/or understandings shall be of no effect. No waiver, amendment or discharge of this Agreement shall be valid unless it is in writing and signed by the party to be obligated. This Agreement shall, subject to any provision of this Agreement that may prohibit or curtail assignment of rights, bind and inure to the benefit of the parties and their heirs, assigns, representatives and successors; however, there are no intended third-party beneficiaries to this Agreement except those expressly set forth herein, and only the parties or their heirs, assigns, representatives and successors are entitled to enforce this Agreement. If any provision of this Agreement is held by a court to be invalid or unenforceable, the other provisions shall remain in effect.

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No inference or presumption shall be drawn if a party or its attorney prepared and/or drafted this Agreement; it shall be conclusively presumed that the parties participated equally in its preparation and/or drafting.

8. Notice. For the purposes of this Agreement, unless changed by written notice, the mailing addresses of both parties for all purposes shall be:

Owner’s Notice Address:

NHP/PMB Chula Vista, LLC

610 Newport Center Drive, Suite 1150

Newport Beach, CA 92660

949.759.6687 fax

949.718.4400 phone

Agent’s Notice Address:

PMB Real Estate Services LLC

Attention: President

12348 High Bluff Drive, Suite 100

San Diego, CA 92130

858.794.1910 fax

858.794.1900 phone

9. Assignment. Agent shall not sell, assign or otherwise transfer any of its rights or delegate any of its obligations under this Agreement without the prior written consent of Owner (which may be granted or withheld in Owner’s sole and absolute discretion).

10. Confidentiality. Except as may be required by applicable laws or governmental regulations governing Agent, at all times during the period of this Agreement and thereafter, Agent shall maintain strict confidence with respect to any and all information of a confidential, proprietary nature which is or may be either applicable to, or related in any way to the Property, including all financial records (the “Confidential Information”).

11. Attachments. The following Addenda are attached to and made a part of this Agreement.

x	Addendum A:	Property Management Agreement
x	Addendum B:	Construction Management Agreement
x	Addendum C:	Leasing Agreement
x	Addendum D:	Asset Management Agreement

12. Overriding Provisions. Sharp Rees-Stealy Corporation (“Tenant”) is providing its own property management of the Property. Therefore, notwithstanding any contrary provision of this Agreement, so long as Tenant is the sole tenant of the Property, the sole responsibility of Agent and the sole fee to be received by Agent shall be for asset management of the Property (as described on the attached Addendum D).

Signatures on next page …

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INTENDING TO BE LEGALLY BOUND, the parties have signed this Management Agreement as of the Effective Date.

OWNER:
NHP/PMB Chula Vista, LLC a Delaware limited liability company
By:
Print:
Title:
AGENT:
PMB REAL ESTATE SERVICES LLC a Delaware limited liability company
By:
	Claude Hooton, President

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Exhibit A

AGENT’S REPORT FORMAT

SHARP REES-STEALY - ASSET AND PROPERTY MANAGEMENT AGREEMENT

Exhibit A – Cover Sheet

E-8

Addendum A

PROPERTY MANAGEMENT

This Addendum A (this “Addendum”) is attached to and made a part of the Asset and Property Management Agreement (the “Management Agreement”).

1. Term. The commencement and termination dates of this Addendum shall coincide with the respective dates as described in the Management Agreement, subject to earlier termination as set forth therein.

2. Agent’s Responsibilities. Agent shall appoint a manager to manage the Property (the “Property Manager”). The Property Manager shall be Agent’s primary representative in managing the Property, and Agent shall keep Owner apprised of the identity and contact information of the Property Manager at all times. Agent’s authorities, duties, and responsibilities in connection with the Property’s management shall be as follows:

2.1. Agent shall make its best commercial efforts to collect, and enforce the collection of, all rentals and other charges due Owner from tenants or other occupants of the Property in accordance with the terms of their leases or rental agreements.

2.2. From Owner’s funds or as otherwise directed by Owner in writing, Agent is authorized to make all payments for the operation of the Property as indicated below. Agent shall cause to be disbursed regularly and punctually, (a) the aggregate amount required to be paid under the loan documents affecting the Properties, including amounts due for interest, amortization of principal and allocation to reserves or escrow funds, and (b) unless paid pursuant to a reserve established under such loan documents, the amount of all ad valorem taxes and other impositions levied against the Property and all insurance policy premiums, which shall be paid before delinquent or prior to the addition thereto of any interest or penalties. Agent is responsible for maintaining appropriate cash disbursement policies and procedures to ensure the appropriate controls over disbursement and shall deliver written notice to Owner if Owner’s funds held by Agent are projected to be insufficient for the payments indicated below. If Owner elects to make any or all payments associated with the Property, Owner shall make such payments in a timely fashion and provide Agent with such documentation and accounting procedures for said payments as Agent deems necessary to fulfill Agent’s responsibilities for operation of the Property. Responsibility for payments for specific items is as follows:

Agent	Owner
x	¨	Real Property taxes, assessments, fees, charges
x	¨	Insurance policy premiums
¨	x	Income taxes arising from the income of the Property
x	¨	Mortgage/Trust Deed Loan payments

2.3. Agent shall be responsible for the payment on behalf of Owner for all other fees and payments necessary for the efficient operation of the Property. In cases of emergency, which in Agent’s opinion requires immediate repairs or alterations costing in excess of any budgeted amount, Agent shall use its reasonable discretion. Agent shall maintain accurate records of all funds received and disbursed in connection with Agent’s management of Property and said records shall be available for Owner’s inspection at reasonable times on receipt of prior written notice. All such books and records shall be and remain Owner’s property and, on the expiration or termination of this Agreement, shall be turned over to Owner or its designee so as to insure the orderly continuance of the management, operation and maintenance of the Property. Agent’s accounting

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records and reports will be provided in Agent’s current standard format subject to the provisions of Section 2.3 of the Management Agreement. Not later than the fifteenth (15^th) day of each month during the Term, with respect to the preceding calendar month, and not later than the tenth (10^th) day of the month after the close of a calendar quarter (i.e., the 10^th of January, April, July, and October) with respect to the preceding calendar quarter, and not later than January 10^th of each calendar year during the Term, Agent shall furnish Owner a statement of all revenues collected by Agent and all costs and expenses incurred by Agent in connection with the Property for the preceding calendar month, calendar quarter, or calendar year, as the case may be, prepared in such reasonable detail and form as shall reasonably be required by Owner. After deducting from gross monthly collections all expenses, reserves, any sums required by law, and Agent’s fees, the net amount of all funds collected for Owner’s account shall be remitted monthly by Agent to Owner by wire transfer or ACH payment at the address specified herein or as Owner may otherwise direct in writing. Owner and Agent may elect to retain, disburse, or remit funds in such other manner as may be mutually agreed on. Agent shall also render to Owner a statement showing all amounts received and disbursed for the period reported.

2.4. Agent will establish a separate bank account for the Property and will use that account for the deposit of all revenues from the Property and the disbursement of all payments relating to the Property.

2.5. Agent shall make all commercially reasonable efforts to effectively and efficiently manage the Property, including the monitoring of independent contractors responsible for the repair and maintenance and other services related to the Property. Agent shall arrange for, coordinate, supervise, administer, and manage on behalf and for the account and at the expense of Owner all activities and services required for the management, operation, and maintenance of the Property in a manner normally associated with high quality, comparable medical office buildings in the Chula Vista, California area, in a manner and condition that is at least as good as the condition in which the Property is presently maintained, and consistent with the standards applied by Agent and “Affiliates of Agent” (defined below) with respect to the management of all other properties owned by Agent or Affiliates of Agent during the period that they were previously managed by Agent on behalf of various Affiliates of Agent, subject to the terms of this Agreement. On the basis of and consistent with the “Budget” (defined below), Agent shall execute on behalf of Owner, contracts for water, electricity, gas, fuel, oil, landscape maintenance, security services, cleaning, copier rental, sign service, vending, telephone, vermin extermination, trash removal, and other necessary services as necessary (collectively, “Service Contracts”). Service Contracts which are (a) entered into in arms length transactions and in accordance with the terms of the Budget, (b) for a term length of no more than one (1) year, and (c) cancelable by Owner, or by Agent on behalf of Owner, on thirty (30) days written notice without any termination fee or penalty shall not require Owner’s prior approval. All other Service Contracts shall require Owner’s prior written approval. Agent shall obtain written approval from Owner before entering into any contract or agreement with any Affiliates of Agent and in all events such contracts or agreements must be on commercially reasonable and market terms. When taking bids or issuing purchase orders, Agent shall act at all times on behalf of Owner and shall be under a duty to secure for and credit to Owner any discounts, commissions, or rebates obtained as a result of such purchases. Agent shall, at the time of taking bids, disclose to Owner any other relationship existing or contemplated with such bidder. Notwithstanding any of the foregoing, in no event shall Agent enter into any Service Contract that is intended to provide income to Owner without Owner’s prior written approval.

2.6. Agent, in its capacity as property manager, shall use its commercially reasonable efforts to cause or enable Owner: (a) to comply with all duties and obligations of Owner as “landlord” or “tenant”, as the case may be, (exclusive of those duties and obligations, if

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any, which by their nature must be performed by Owner) under all leases, rental agreements, and ground leases affecting the Property, and (b) not to permit any default to occur thereunder on the part of Owner as such “landlord” or “tenant”. Agent shall promptly prepare, deliver, coordinate and comply with any and all reporting requirements under any loan documents affecting the Property (including any and all leasing reports, development reports, accounting reports and financial statements). Agent shall promptly prepare, deliver to Owner for Owner’s approval, and only upon receipt of Owner’s approval, submit to any lender under such loan documents, any and all draw requests and other deliveries required under such loan documents in connection with draw requests and disbursements and, in connection with the foregoing, coordinate the draw request and disbursement process all in accordance with the requirements of such loan documents.

2.7. Agent, at Owner’s expense, shall make or cause to be made such alterations to the Property as Owner and Agent agree are necessary or desirable, or as required by the terms of leases or rental agreements, and replace, or cause to be replaced, damaged, worn, or inoperative equipment and fixtures.

2.8. Agent shall provide Owner, on request from time to time, a completed property questionnaire in the form reasonably requested by Owner. Agent, at Owner’s expense and within a reasonable time, shall provide, or cause to be provided, and shall coordinate and supervise all security services and systems necessary to protect the Property. Such services shall include implementation of a plan of evacuation or other appropriate action in the event of any emergency, which plan shall be circulated and demonstrated to all tenants or occupants of the Property. When an emergency occurs, Agent shall take whatever action it deems reasonable to protect, maintain, or repair the Property and to protect the occupants of the Property, and shall promptly notify Owner of any such action. For the purpose of this provision, an “emergency” means an event that, in Agent’s reasonable belief, will cause immediate threat of damage or injury to persons or property.

2.9. Subject to the provisions of this Section 2.9, Agent shall hire, prepare, insure, and enter into contracts with, supervise, and have the authority to terminate any independent contractors (on Owner’s behalf), and Property employees (on Agent’s behalf) reasonably required in the proper operation of the Property. Consistent with the Budget, Agent shall execute on behalf of Owner (without Owner’s co-signature or specific approval), such agreements with independent contractors (collectively, “Independent Contractor Agreements”) as are (a) entered into in arms length transactions and in accordance with the Budget, (b) for a term length of no more than one (1) year, and (c) cancelable by Owner, or by Agent on behalf of Owner, on thirty (30) days written notice without any termination fee or penalty. All other Independent Contractor Agreements shall require Owner’s prior written approval. Furthermore, notwithstanding the foregoing, Agent shall obtain Owner’s prior written approval before entering into any Independent Contractor Agreements with any Affiliates of Agent and in all events such contracts must be on commercially reasonable and market terms. Agent shall, at the time of taking bids, disclose to Owner any other relationship existing or contemplated with such bidder. Notwithstanding any of the foregoing, in no event shall Agent enter into any Independent Contractor Agreement that is intended to provide income to Owner without Owner’s prior written approval. All Property employees are Agent’s employees, not Owner’s. Agent shall prepare payroll tax returns and shall execute and file punctually when due all forms, reports, and returns required by law relating to the employment of personnel and to the operation of the Property.

2.10. Agent’s Property Manager shall receive tenant and other occupant communications on Owner’s behalf, shall coordinate and handle all relationships with, and complaints and requests from, tenants or occupants of the Property and shall use reasonable efforts to ensure tenant and occupant compliance with lease or rental agreement provisions.

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Agent shall maintain professional, business-like relationships with tenants and occupants and shall receive and respond timely to all tenants’ and occupants’ complaints and requests for services. Agent shall be required to respond to such complaints as may be directed by Owner, and Owner shall respond promptly indicating its approval or changes to any recommendation of Agent or its approval or changes to any itemized alternative.

2.11. Agent is not authorized to practice law. If Agent deems legal assistance necessary for any reason, including rent collection or tenant or occupant eviction, Agent shall obtain such assistance from legal counsel approved by Owner. Any legal fees, costs, and expenses shall be Owner’s responsibility and paid from Owner’s funds; provided that Owner has previously approved such fees and expenses in writing.

2.12. Agent shall supervise appraisers, counsel, and other consultants retained by Owner to evaluate Property value, performance, potential, and/or condition.

2.13. Agent shall appeal property assessments or tax valuations, on Owner’s request or on Agents reasonable estimate of success in reducing said assessments or tax valuations.

2.14. Agent shall supervise the property management function, perform inspections of property, and shall when appropriate make recommendations to Owner for changes, alterations, or capital improvements to enhance the value of the Property and optimize cash flow. Agent shall cause an inventory to be taken of all furniture and office equipment, and any other major equipment or material belonging to the Property. Said furniture and equipment will be used in the operation of the Property and Agent shall exert commercially reasonable efforts to maintain such assets in the condition delivered to Agent, ordinary wear and tear excepted.

2.15. Agent shall, on Owner’s request, procure financing on Owner’s behalf, including construction loans, permanent loans, refinancing of existing loans, or restructuring of Property debt and equity, or other types of financing on Owner’s written request.

2.16. Agent shall coordinate with local government and the community to facilitate beneficial interaction and communication.

3. Owner’s Responsibilities. Owner shall, if applicable, provide Agent with copies of all documentation and records in Owner’s possession, to allow Agent to perform its duties arising out of this Addendum.

4. Annual Budget. Not later than ninety (90) days before each calendar year during the Term, Agent shall prepare and present to Owner an annual budget (the “Budget”) showing in reasonable detail for such year the following:

• With respect to management of the Property, Agent’s month-to-month estimate of (a) projected rents, receipts and other revenues, (b) projected expenses, and (c) projected occupancy levels.

• With respect to capital improvements and replacements of and additions to furniture, fixtures and equipment for the Property, (a) a list of capital needs for such year for improvements, furniture, fixtures, and operating equipment, including a five (5) year projection of such items, (b) the projected cost of the items on such list, and (c) the anticipated schedule for the purchase and/or completion of such items.

4.1. Owner shall have thirty (30) days from receipt of the Budget to approve it. Owner shall be deemed to have approved the Budget unless within such thirty (30) days, Owner notifies

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Agent in writing of its disapproval and the specific items contained in the Budget which it disapproves. If Owner disapproves the Budget, Agent shall submit to Owner a revised Budget within fifteen (15) days after receipt of notice of Owner’s disapproval, and Owner shall then have fifteen (15) days after receipt of the revised Budget to approve or disapprove the Budget as so revised.

4.2. If Owner has not approved the Budget by December 1^st , Agent shall manage, operate, and maintain the Property to the extent practicable in accordance with the Budget for the preceding calendar year until such time as Owner approves a budget for the then current year.

4.3. Notwithstanding the limitations of the Budget, Agent, without Owner’s prior consent, may expend Owner’s funds not provided for in the Budget for emergency maintenance and repairs of the Property which Agent in good faith reasonably believes to be necessary to avoid the suspension of essential services to the Property or to prevent, or minimize the risk of, injury to persons or property in or about the Property. Agent shall notify Owner of and account to Owner for any such expenditures as soon as reasonably possible after they are made.

4.4. As of the Effective Date, Agent has submitted to Owner, and Owner has approved, the Budget attached hereto as Exhibit A for 2008 with respect to the Property.

5. Fees. Owner shall pay Agent as the monthly fee for its property management services hereunder four percent (4%) of all gross monthly collections (including any parking revenues) from the Property, including collections made by Owner or others designated by Owner, but excluding prepaid rents or lease termination payments (except to the extent such rents or payments are applied for such month) (the “Monthly Property Management Fee”). Notwithstanding the foregoing, if on or prior to the Effective Date Pacific Medical Buildings LLC or an “Affiliate” (as defined in the Management Agreement) of Pacific Medical Buildings LLC (collectively, “Affiliates of Agent”) entered into an agreement or other arrangement with any tenant, occupant, hospital or other third party, restricting the amount of the monthly property management fee permitted to be passed through to the tenants or occupants of the Property to an amount less than four percent (4%) of gross monthly collections from the Property, then the Monthly Property Management Fee shall be reduced to such lesser amount. “Gross monthly collections” means the grand total of all rents (base and additional rent), security deposits (only when applied or forfeited), and other monies accrued that are collected during the month from the Property, or that have been previously collected and are applied during such month. In no event shall Agent’s monthly fee be less than $500, which amount is recognized by Owner and Agent as a reasonable minimum amount for services rendered hereunder. Owner will also pay for any additional reasonable costs or expenses that Agent incurs as a result of the extra expense above standard GAAP accounting required for SOX/SEC compliance in accordance with Section 2.4 of the Management Agreement. All expenses relating to personnel (including independent contractors, building engineers and the Property Managers) who work exclusively at the Property and/or who provide services to the Property and whose time can be reasonably allocated to the Property are in addition to Agent’s fee. Owner shall not be obligated to reimburse Agent for any expenses for off-site office equipment or off-site office supplies of Agent, for any overhead expenses of Agent incurred with respect to its general offices, or for any salaries, benefits, or wages allocable to time spent on projects other than the Property. Owner shall not be obligated to reimburse Agent for any obligations or expenses resulting from the gross negligence, fraud, or willful misconduct of Agent, nor for the failure of Agent to perform its material obligations and duties under this Agreement.

If there is a conflict between the terms of this Addendum and those of the Management Agreement, the terms of the Management Agreement shall prevail. Initial-capitalized terms defined in the Management

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Agreement and used in this Addendum shall have the same meaning as defined in the Management Agreement.

end Addendum

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Exhibit A to Addendum A

INITIAL BUDGET

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Addendum B

CONSTRUCTION MANAGEMENT

This Addendum B (this “Addendum”) is attached to and made a part of the Asset and Property Management Agreement (the “Management Agreement”).

Owner authorizes Agent to manage, supervise, and provide construction management services for the Property, in the general capacity as identified below and more completely described within this Addendum.

x Construction and/or demolition of one or more buildings or structures at the Property.

x Construction, refurbishment or modification and/or demolition of portions or the whole of the common areas in or on one or more buildings or structures at the Property.

x Construction and/or demolition of tenant improvements within existing or future buildings at the Property.

1. Term. The commencement and termination dates of this Addendum shall coincide with the respective dates as described in the Management Agreement, subject to earlier termination as set forth therein.

2. Agent’s Responsibilities.

2.1. Agent shall provide as-needed supervision of all construction and administrative personnel required for each construction project, including any contractors, consultants, legal counsel, and accounting personnel. All employees (except independent contractors retained by Agent on behalf of Owner from time to time) shall be employed directly by Agent who shall be solely responsible for fulfilling all payroll tax functions with respect to the same.

2.2. Agent shall use commercially reasonable due diligence in the construction management for each project and furnish the full services of its organization in the management of such project.

2.3. Agent shall review and approve the monthly billings of the general contractor (which billings shall be subject to inspection by Owner at all times).

2.4. Agent shall procure and maintain such public liability and fire insurance for each project as directed by Owner with Owner and Agent named as additional insureds.

2.5. Agent shall not be obligated to make any monetary advance or incur any liability for the account of the Owner.

2.6. Agent shall diligently oversee and coordinate any capital improvements for the Property pursuant to plans approved from time to time by Owner (including any so-called “Required Repairs” or “Scheduled Renovations” as may be required by any loan documents affecting the Property and all approved plans, budgets and schedules therefor).

3. Owner’s Responsibilities.

3.1. Owner shall procure and maintain adequate property damage and public liability insurance for the Property in accordance with Section 5.3 of the Management Agreement, and shall name Agent as an additional insured in accordance with

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Section 5.5 of the Management Agreement. Owner shall provide Agent with a copy of such insurance policy as available in accordance with Section 5.6 of the Management Agreement.

3.2. Agent shall at no time be obligated to advance funds on behalf of Owner.

4. Fees. During the Term and with respect to any construction project which is not subject to a separate development agreement between Owner (or its Affiliate) and Agent (or Affiliates of Agent), Owner shall pay Agent a construction management fee calculated based on all direct construction costs incurred for each construction project (such costs, for each construction project, the “Construction Costs”), relating to: (a) the construction or demolition of buildings at the Property to the extent such construction or demolition is done after the completion of the initial construction, or (b) any second generation tenant improvements at the Property after the initial construction of the Property, whether done by Agent or by a tenant or occupant. Owner shall pay Agent (i) ten percent (10%) of the Construction Costs with respect to the first Seventy-Five Thousand Dollars ($75,000) of the Construction Costs, and (ii) five percent (5%) of the Construction Costs with respect to any Construction Costs in excess of Seventy Five Thousand Dollars ($75,000), if applicable. (For example, if the Construction Costs associated with a particular project total $100,000, Agent would receive construction management fees totaling $8,750 (i.e., (0.10 x $75,000) + (0.05 x $25,000)), and if the Construction Costs associated with a particular project total $70,000, Agent would receive construction management fees totaling $7,000 (i.e., 0.10 x $70,000).) The construction management fee shall be considered earned as Construction Costs are incurred for the project and shall be payable monthly (subject to a ten percent (10%) retention) on a percentage basis of total cost versus work completed and accepted. Any commissions, fees, or expenses of any third party construction managers shall be paid by Agent from this fee.

If there is a conflict between the terms of this Addendum and those of the Management Agreement, the terms of the Management Agreement shall prevail. Initial-capitalized terms defined in the Management Agreement and used in this Addendum shall have the same meaning as defined in the Management Agreement.

end Addendum

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Addendum C

LEASING

This Addendum C (this “Addendum”) is attached to and made a part of the Asset and Property Management Agreement (the “Management Agreement”).

1. Term. The commencement and termination dates of this Addendum shall coincide with the respective dates as described in the Management Agreement, subject to earlier termination as set forth therein. If the Management Agreement is terminated in whole or with respect to the “Property Management Services” (as defined in the Management Agreement), concurrently with such termination, Agent shall supply Owner with a list (the “List”) of tenants or occupants with whom Agent has been actively negotiating new leases or rental agreements for the Property and with whom Agent has exchanged draft letters of intent or draft term sheets (and Agent shall concurrently therewith supply Owner with copies of such draft letters of intent and/or draft term sheets). Owner shall pay to Agent the fees set forth in Section 4.1 below (subject to Section 4.3 below) for any new lease or rental agreement entered into by Owner and any tenant or occupant on the List, if (and only if) such new lease or rental agreement is fully executed within one hundred eighty (180) days of such termination.

2. Agent’s Responsibilities. Agent shall work diligently and use commercially reasonable efforts to procure tenants or occupants for the leasing or rental of the Property, including hiring, supervising, and terminating leasing brokers to assist in the leasing of available spaces, provided that such leasing brokers are not “Affiliates of Agent” (as defined in Addendum A to the Management Agreement) and charge customary market fees. Agent shall seek to fully lease and market the Property in at least an equal and comparable manner to the management, leasing and marketing efforts of Agent and Affiliates of Agent with respect to other properties which Agent or any Affiliates of Agent own, has an interest in, or manages, and shall not induce any of the tenants or occupants of the Property to vacate or terminate any of their leases or rental agreements at any of the properties owned by Owner or its “Affiliates” (as defined in the Management Agreement) in favor of relocating to any other property which Agent or any Affiliates of Agent owns, has an interest in, or manages. Agent shall prepare all leases, rental agreements, and modifications thereof including new leases, rental agreements, renewals, amendments, extensions, modifications, terminations, and all other such documents as may be necessary for the duties of Agent described herein and to the extent permitted pursuant to Section 5 of this Addendum C, Agent shall execute, on Owner’s behalf (and without Owner’s specific approval) such documents. Agent shall furnish Owner a fully executed original of said documents. Agent shall execute such listing agreements as are necessary to perform this function, and Owner shall be responsible for payment of all commissions due under the listing agreements to the extent such amounts have been itemized in the “Budget” (as defined in Addendum A to the Management Agreement).

3. Owner’s Responsibilities. Owner shall provide Agent with all such reasonable documentation and information necessary for Agent to perform its duties as described herein.

4. Fees.

4.1. With respect to any new lease or rental agreement for the Property, Owner shall pay Agent 5% of the gross revenues from such lease or rental agreement over the initial five (5) year lease term and 2.5% of the gross revenues of any part of the initial term beyond five (5) years. Leasing fees shall be payable half on execution of the lease or rental agreement and half upon Agent’s receipt of the tenant’s or occupant’s payment of its first (1^st) month of base rent under such lease or rental agreement.

4.2. For renewal of any lease or rental agreement (including options to extend/renew), Owner shall pay Agent 2.5% of gross revenues from such lease or rental agreement over the entire renewal term, payable on renewal.

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4.3. Any leasing commissions paid to an outside broker shall be paid by Agent up to the amount of Agent’s fee described above.

If there is a conflict between the terms of this Addendum and those of the Management Agreement, the terms of the Management Agreement shall prevail. Initial-capitalized terms defined in the Management Agreement and used in this Addendum shall have the same meaning as defined in the Management Agreement.

5. Leasing Guidelines. Owner and Agent have adopted for the Property the Leasing Guidelines set forth in the attached Exhibit A to this Addendum C. Agent shall adhere to the Leasing Guidelines but retains the right to deviate from the Leasing Guidelines as it sees fit in the exercise of its commercially reasonable discretion during each leasing process; provided that Agent shall not, without Owner’s prior, written consent, not to be unreasonably withheld, conditioned, or delayed, have such discretion with respect to any Property tenant or occupant whose lease represents more than ten percent (10%) of the Property’s rentable square footage. Owner and Agent shall annually review the Leasing Guidelines in good faith during the Term and make such revisions thereto as they agree. Agent shall have the right to review and propose additional reasonable changes to the Leasing Guidelines at other times if certain conditions exist which necessitate such changes (provided that Owner shall have the right, in its reasonable discretion, to accept or reject such proposals).

end Addendum

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Exhibit A to Addendum C

LEASING GUIDELINES

<Parties to attach Leasing Guidelines only if there are anticipated vacancies and/or lease expirations within the current Budget period. Otherwise, Leasing Guidelines will be established, as necessary, during the Budget process.>

end Exhibit

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Addendum D

ASSET MANAGEMENT

This Addendum D (this “Addendum”) is attached to and made a part of the Asset and Property Management Agreement (the “Management Agreement”).

1. Term. The commencement and termination dates of this Addendum shall coincide with the respective dates as described in the Management Agreement, subject to earlier termination as set forth therein.

2. Agent’s Asset Management Responsibilities. Agent’s duties and responsibilities in connection with the Property’s asset management shall be as follows:

2.1. Agent shall prepare, on a quarterly basis, market/competitive analysis that includes specific comparisons of the market and Owner’s competitors to the performance of the Property;

2.2. Agent shall conduct periodic meetings with the management personnel of any hospital tenants or occupants of the Property to review opportunities for further development and/or Property improvements;

2.3. Agent shall analyze and recommend solutions to potential problems at the Property and related campus/physician issues;

2.4. Agent shall perform oversight with respect to the preparation and compliance of the annual business plan;

2.5. Agent shall conduct quarterly review of the Property’s performance; and

2.6. Agent shall insure that the Property and all other assets that are managed by Agent for the benefit of Owner or its Affiliates are operated in a manner that shall not disqualify Owner or its Affiliates from being taxed as a real estate investment trust under Sections 856-859 of the United States Internal Revenue Code of 1986, as reasonably determined by Owner or its Affiliates (but Agent shall not be responsible to determine such manner, it being Owner’s responsibility to advise Agent thereof in writing from time to time).

3. Owner’s Responsibilities. Owner shall provide Agent with all such reasonable documentation and information necessary for Agent to perform its duties as described herein.

4. Fees. Owner shall pay Agent for its asset management services, on a quarterly basis, an amount equal to one-fourth ( ¹/4) of the annual fee, which annual fee shall be equal to sixty-five hundredths of one percent (0.65%) of all gross annual collections (including any parking revenues) from the Property, including collections made by Owner or others designated by Owner, but excluding prepaid rents or lease termination payments (except to the extent such rents or payments are applied for such year). “Gross annual collections” means the grand total of all rents (base and additional rent), security deposits (only when applied or forfeited), and other monies accrued that are collected during the applicable year from the Property or that have been previously collected and are applied during such year.

If there is a conflict between the terms of this Addendum and those of the Management Agreement, the terms of the Management Agreement shall prevail. Initial-capitalized terms defined in the Management Agreement and used in this Addendum shall have the same meaning as defined in the Management Agreement.

end Addendum

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EXHIBIT “R”

PROPERTY MANAGEMENT AGREEMENT

See attached.

R-1

ASSET AND PROPERTY MANAGEMENT AGREEMENT

THIS ASSET AND PROPERTY MANAGEMENT AGREEMENT (“Agreement”) is made as of <                      > (“Effective Date”), by the following parties:

“Owner”:	<INSERT NAME OF PROPERTY OWNING ENTITY>
“Agent”:	PMB Real Estate Services LLC
“Property”:	<Insert Name Of Property>

Owner designates Agent as the managing Agent for Owner’s Property. Agent accepts this designation and agrees to furnish the services of its organization for the duties as more completely described below and in the attached Addenda:

1. Term of Agreement. The term of this Agreement (“Term”) shall commence on <the Effective Date Insert Closing Date Of The Property Contribution Transaction>, and terminate ten (10) years after the Effective Date. This Agreement, if not previously renewed in writing for an additional fixed period, may be canceled effective at the end of the Term by either party giving written notice no less than thirty (30) days before the expiration of the Term. If not so canceled, the Term shall automatically be extended for additional terms of twelve (12) calendar months each, which shall be subject to cancellation in accordance with the provisions outlined above.

1.1. Notwithstanding the above, at any time during the Term, Owner may serve written notice to Agent of its intention to cancel this Agreement in whole, or to cancel this Agreement only with respect to the “Asset Management Services” (defined below) or the “Property Management Services” (defined below), in each case, for Cause (defined below), provided written notice is given at least sixty (60) days before the effective date of such cancellation. During the 60 days, Agent may cure the Cause, if capable of being cured, or, if the Cause is incapable of being cured within that time, but can be cured within a reasonable period thereafter, commence to cure it and thereafter diligently pursue to cure it, in which case this Agreement shall not terminate pursuant to such written notice unless Agent fails to diligently cure such Cause within a reasonable period. As used in this Agreement, “Cause” means, while acting as Agent: fraud, bankruptcy, gross negligence, willful misconduct, material adverse default (i.e., after customary notice and opportunity to cure) of Agent, its officers, employees or agents, in all cases having a direct, substantial, and material adverse affect on the Property’s business. Cause will be established only after judicial or arbitral determination, provided that Agent may not cure such Cause following such judicial or arbitral determination unless Owner has consented to the same. As used in this Agreement, “Asset Management Services” means each of Agent’s obligations pursuant to Addendum D attached hereto. As used in this Agreement, “Property Management Services” means each of Agent’s obligations pursuant to Addendum A, Addendum B, and Addendum C attached hereto, as well as Agent’s obligations pursuant to Section 2.1(b)-(d) and Section 5.3 below.

1.2. [Notwithstanding the foregoing provisions of Section 1.1 above, the cancellation of this Agreement with respect to the Property Management Services will also require the approval of <INSERT NAME OF HOSPITAL IF APPLICABLE> (“Ground Lessor”), to the extent required under that certain <INSERT NAME OF APPLICABLE DOCUMENT> (“Ground Lease”).]

1.3. Notwithstanding the foregoing provisions of this Section 1, this Agreement shall automatically terminate upon: (a) the sale or other transfer by Owner of the Property to an unaffiliated third party bona fide purchaser for value, or (b) the occurrence of a major

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casualty to the Property so that the Property is no longer in operation and is reasonably expected by Owner to be so for a period of at least eighteen (18) months.

1.4. If this Agreement is terminated in whole or in part, Owner and Agent will cooperate in the timely and coordinated transfer of the applicable management responsibilities and the applicable files, keys, plans, specifications, and such other accountings, books and records relating to the Property. If necessary, Agent shall assign such existing contracts relating to the operations and maintenance of the Property as Owner shall require (which by their terms are assignable), provided that Owner or replacement agent shall agree to assume all liability thereunder accruing after the date of assignment.

1.5. If this Agreement is terminated in whole or in part, Agent shall be paid in accordance with the provisions of this Agreement for its performance of the Asset Management Services and/or the Property Management Services, as applicable, prior to the effective date of such termination (or such later date as is mutually agreed upon by the parties hereto). Termination of this Agreement shall release Agent for liability for failure to perform the Asset Management Services and/or the Property Management Services, as applicable, after such termination (provided that such release shall not apply to any provisions hereof which expressly survive termination).

2. Responsibility of Agent. In consideration of the real estate management services to be rendered by Agent under this Agreement, Agent agrees:

2.1. Agent shall use commercially reasonable efforts: (a) in the performance of its duties for the Property in accordance with the obligations and limitations set forth in the attached Addenda, (b) to advise Owner periodically concerning any claims (including insurance claims) involving the Property, (c) to ensure that the Property complies with applicable laws and (d) to operate the Property in a manner that shall not disqualify Owner or its “Affiliates” (defined below) from being taxed as a real estate investment trust under Sections 856-859 of the United States Internal Revenue Code of 1986, as reasonably determined by Owner or its Affiliates (but Agent shall not be responsible to determine such manner, it being Owner’s responsibility to advise Agent thereof in writing from time to time). Agent shall not be obligated to perform such services as not specifically described herein. Agent shall not commence litigation or incur legal fees on Owner’s behalf without Owner’s prior written consent. As used herein, an “Affiliate” of any entity shall mean any entity, company, corporation, limited liability company, limited partnership, general partnership, or joint venture, that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such entity.

2.2. Agent shall maintain accurate records of all funds received and disbursed in connection with Agent’s duties and said records shall be available for Owner’s inspection at reasonable times on receipt of written notice therefore.

2.3. Agent’s accounting records and reports will be provided in Agent’s current standard format (see copy of Agent’s current standard format as of the Effective Date attached hereto as Exhibit A). Owner and Agent may agree to alter the substance and form of reports from Agent to Owner. Notwithstanding the foregoing, Agent shall cooperate with Owner to make such modifications to the reporting format as Owner may reasonably request. Agent shall preserve the same for at least seven (7) years after the close of the calendar year to which they relate. Any person designated by Owner shall have access to such records, accounts and books and all other material pertaining to the Property and its operations during business hours on reasonable notice.

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2.4. Agent shall be responsible for costs relating to normal accounting required with respect to Agent’s duties under this Agreement. Owner shall pay for any additional costs or expenses that Agent or its Affiliates incur as a result of compliance with SOX or SEC rules, regulations, or laws with respect to the Property.

2.5. Agent shall be authorized to sign, on Owner’s behalf, tenant leases or rental agreements without Owner’s co-signature, to the extent permitted pursuant to Section 5 of the attached Addendum C.

3. Responsibilities of Owner. In consideration of the real estate management services to be rendered by Agent under this Agreement, Owner agrees:

3.1. Owner shall, if applicable and if Agent reasonably deems it necessary, promptly furnish Agent with all documents and records as needed by Agent for the efficient management of the Property, including all leases, amendments and correspondence related thereto; the status of rental payments; mortgage loan information and payment instructions; copies of service contracts in effect; and all applicable insurance policies.

3.2. Owner shall promptly provide Agent with all necessary funds for Agent to fulfill its obligations under this Agreement. If Owner has not provided said funds within seven (7) days after Agent’s written request, Agent may, at Agent’s sole option and in addition to all other remedies available to Agent, terminate this Agreement, provided that such termination shall occur prior to Owner’s delivery of such funds. Agent shall not be required to advance funds for Owner’s account.

4. Termination of Property Manager. At any time during the Term, Owner may serve written notice to Agent of its intention to cause Agent to replace the “Property Manager” (defined in Addendum A hereto) due to such person’s failure to perform in a reasonable, professional manner in accordance with industry standards, as reasonably determined by Owner. [To the extent required under the Ground Lease, Owner shall first obtain Ground Lessor’s consent. If Ground Lessor so consents, Agent shall contact Ground Lessor, to the extent required under the Ground Lease, to request its consent to such replacement within thirty (30) days of receipt of such consent and Owner’s notice.] Agent must replace the Property Manager within sixty (60) days of receiving each such required consent.

5. Insurance and Indemnification. Agent shall not be responsible for the type, amount, or sufficiency of insurance coverage on the Property.

5.1. Except for matters involving Agent’s Cause, Owner shall indemnify, defend, and hold Agent and its members, partners, officers, employees and agents harmless from any and all claims, costs, expenses, demands, attorney’s fees, suits, liabilities, judgments and damages arising from or connected with the management of Property by Agent of the performance or exercise of any of the duties, obligations, powers or authorities granted to Agent under this Agreement; Owner shall promptly reimburse Agent for any monies Agent is required to pay whatsoever for items covered by this Section 5, and such obligation for reimbursement shall survive termination of this Agreement. Owner’s obligations under this Section 5.1 shall survive termination of this Agreement but shall not apply to any claim that relates to acts occurring after the date of termination.

5.2. Agent shall indemnify, defend, and hold Owner and its members, partners, officers, employees and agents harmless from all claims, costs, expenses, demands, attorneys’ fees, suits, liabilities, judgments, and damages arising from or connected with any breach or default by Agent of its obligations under this Agreement which would constitute Cause and entitle Owner to terminate this Agreement. Such obligations of Agent shall: (a) apply

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without regard to whether this Agreement is actually terminated, and (b) survive termination of this Agreement. In addition, if this Agreement is terminated in whole or in part pursuant to Sections 1.1 above or 7.1 below, Agent shall indemnify, defend, and hold Owner harmless from all claims, costs, expenses, demands, attorneys’ fees, suits, liabilities, judgments, and damages arising from or connected with such termination; provided, however, that the total costs payable by Agent pursuant to this sentence shall not exceed the total amount of fees paid to Agent by Owner hereunder with respect to the Property for the twenty-four (24) month period immediately preceding such termination pursuant to this Agreement.

5.3. Owner shall obtain and maintain insurance for the Property in forms and coverage amounts of at least the forms and coverage amounts as are customary for similar medical office buildings. Agent shall periodically review and coordinate with Owner in matters regarding insurance coverage. Owner and Agent each waives claims for recovery against the other to the extent recovered under their respective insurance policies.

5.4. Agent shall carry Worker’s Compensation and employer’s liability insurance at limits no less than statutory requirements where required to do so by law, including employer’s non-owned auto liability insurance. Agent shall comply with all local, State and Federal laws and regulations, including minimum wage laws, applicable to any employees.

5.5. At all times during the continuance of this Agreement all bodily injury, property damage and personal injury insurance carried by Owner on Property shall, without cost to Agent, extend to, insure and indemnify Agent, as well as Owner, by endorsement of such insurance coverage to specifically name Agent as an additional insured.

5.6. Copies of all insurance coverage and endorsements required under this Agreement shall be delivered promptly to each party as required.

6. Termination Accounting. If any payments for Owner’s account are received by Agent after expiration or earlier termination of this Agreement, Agent shall promptly deliver such funds to Owner. If and to the extent there are not sufficient funds in Owner’s account to cover costs relating to the period before such expiration or earlier termination, Owner shall be solely responsible to pay same. Owner shall pay Agent reasonable out-of-pocket expenses incurred by Agent at Owner’s direction after expiration or earlier termination of this Agreement. Within thirty (30) days after expiration or earlier termination of this Agreement, Agent shall deliver to Owner all written reports required with respect to the Property under Section 2.3 above for any period not covered by previously delivered reports up to the time of such expiration or earlier termination.

7. Miscellaneous.

7.1. If a bankruptcy petition is filed by or against either Owner or Agent and is not dismissed within sixty (60) days, or if either makes an assignment for the benefit of creditors or takes advantage of any insolvency act or proceeding, either party may cancel this Agreement on ten (10) days written notice to the other.

7.2. If either party brings an action to enforce or declare rights hereunder or seeks a judicial or arbitral determination of whether Cause may be established, the prevailing party in any such action, on trial, appeal, or otherwise, shall be entitled to reasonable attorneys’ fees to be paid by the losing party.

7.3. This Agreement shall be governed by California law. When the context requires, any gender includes all others, the singular number includes the plural, and vice-versa.

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Captions are inserted for convenience of reference and do not describe or limit the scope or intent of this Agreement. Any recitals above, and any exhibits or schedules referred to and/or attached hereto, are incorporated by reference into this Agreement. “Person” includes any entity. “Including” means including without limitation. This Agreement contains the entire agreement between the parties regarding its subject matter. Any prior oral or written representations, agreements and/or understandings shall be of no effect. No waiver, amendment or discharge of this Agreement shall be valid unless it is in writing and signed by the party to be obligated. This Agreement shall, subject to any provision of this Agreement that may prohibit or curtail assignment of rights, bind and inure to the benefit of the parties and their heirs, assigns, representatives and successors; however, there are no intended third-party beneficiaries to this Agreement except those expressly set forth herein, and only the parties or their heirs, assigns, representatives and successors are entitled to enforce this Agreement. If any provision of this Agreement is held by a court to be invalid or unenforceable, the other provisions shall remain in effect. No inference or presumption shall be drawn if a party or its attorney prepared and/or drafted this Agreement; it shall be conclusively presumed that the parties participated equally in its preparation and/or drafting.

8. Notice. For the purposes of this Agreement, unless changed by written notice, the mailing addresses of both parties for all purposes shall be:

Owner’s Notice Address:

<INSERT NAME OF PROPERTY OWNING ENTITY>

610 Newport Center Drive, Suite 1150

Newport Beach, CA 92660

949.759.6687 fax

949.718.4400 phone

Agent’s Notice Address:

PMB Real Estate Services LLC

Attention: President

12348 High Bluff Drive, Suite 100

San Diego, CA 92130

858.794.1910 fax

858.794.1900 phone

9. Assignment. Agent shall not sell, assign or otherwise transfer any of its rights or delegate any of its obligations under this Agreement without the prior written consent of Owner (which may be granted or withheld in Owner’s sole and absolute discretion).

10. Confidentiality. Except as may be required by applicable laws or governmental regulations governing Agent, at all times during the period of this Agreement and thereafter, Agent shall maintain strict confidence with respect to any and all information of a confidential, proprietary nature which is or may be either applicable to, or related in any way to the Property, including all financial records (the “Confidential Information”).

11. Attachments. The following Addenda are attached to and made a part of this Agreement.

x	Addendum A:	Property Management Agreement
x	Addendum B:	Construction Management Agreement
x	Addendum C:	Leasing Agreement
x	Addendum D:	Asset Management Agreement

Signatures on next page …

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INTENDING TO BE LEGALLY BOUND, the parties have signed this Management Agreement as of the Effective Date.

OWNER:
NHP/PMB                                         , LLC a Delaware limited liability company
By:
Print:
Title:
AGENT:
PMB REAL ESTATE SERVICES LLC a Delaware limited liability company
By:
	Claude Hooton, President

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Exhibit A

AGENT’S REPORT FORMAT

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Exhibit A – Cover Sheet

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Addendum A

PROPERTY MANAGEMENT

This Addendum A (this “Addendum”) is attached to and made a part of the Asset and Property Management Agreement (the “Management Agreement”).

1. Term. The commencement and termination dates of this Addendum shall coincide with the respective dates as described in the Management Agreement, subject to earlier termination as set forth therein.

2. Agent’s Responsibilities. Agent shall appoint a manager to manage the Property (the “Property Manager”). The Property Manager shall be Agent’s primary representative in managing the Property, and Agent shall keep Owner apprised of the identity and contact information of the Property Manager at all times. Agent’s authorities, duties, and responsibilities in connection with the Property’s management shall be as follows:

2.1. Agent shall make its best commercial efforts to collect, and enforce the collection of, all rentals and other charges due Owner from tenants or other occupants of the Property in accordance with the terms of their leases or rental agreements.

2.2. From Owner’s funds or as otherwise directed by Owner in writing, Agent is authorized to make all payments for the operation of the Property as indicated below. Agent shall cause to be disbursed regularly and punctually, (a) the aggregate amount required to be paid under the loan documents affecting the Properties, including amounts due for interest, amortization of principal and allocation to reserves or escrow funds, and (b) unless paid pursuant to a reserve established under such loan documents, the amount of all ad valorem taxes and other impositions levied against the Property and all insurance policy premiums, which shall be paid before delinquent or prior to the addition thereto of any interest or penalties. Agent is responsible for maintaining appropriate cash disbursement policies and procedures to ensure the appropriate controls over disbursement and shall deliver written notice to Owner if Owner’s funds held by Agent are projected to be insufficient for the payments indicated below. If Owner elects to make any or all payments associated with the Property, Owner shall make such payments in a timely fashion and provide Agent with such documentation and accounting procedures for said payments as Agent deems necessary to fulfill Agent’s responsibilities for operation of the Property. Responsibility for payments for specific items is as follows:

Agent	Owner
x	¨	Real Property taxes, assessments, fees, charges
x	¨	Insurance policy premiums
¨	x	Income taxes arising from the income of the Property
x	¨	Mortgage/Trust Deed Loan payments

2.3. Agent shall be responsible for the payment on behalf of Owner for all other fees and payments necessary for the efficient operation of the Property. In cases of emergency, which in Agent’s opinion requires immediate repairs or alterations costing in excess of any budgeted amount, Agent shall use its reasonable discretion. Agent shall maintain accurate records of all funds received and disbursed in connection with Agent’s management of Property and said records shall be available for Owner’s inspection at reasonable times on receipt of prior written notice. All such books and records shall be and remain Owner’s property and, on the expiration or termination of this Agreement, shall be turned over to Owner or its designee so as to insure the orderly continuance of the management, operation and maintenance of the Property. Agent’s accounting

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records and reports will be provided in Agent’s current standard format subject to the provisions of Section 2.3 of the Management Agreement. Not later than the fifteenth (15^th) day of each month during the Term, with respect to the preceding calendar month, and not later than the tenth (10^th) day of the month after the close of a calendar quarter (i.e., the 10^th of January, April, July, and October) with respect to the preceding calendar quarter, and not later than January 10^th of each calendar year during the Term, Agent shall furnish Owner a statement of all revenues collected by Agent and all costs and expenses incurred by Agent in connection with the Property for the preceding calendar month, calendar quarter, or calendar year, as the case may be, prepared in such reasonable detail and form as shall reasonably be required by Owner. After deducting from gross monthly collections all expenses, reserves, any sums required by law, and Agent’s fees, the net amount of all funds collected for Owner’s account shall be remitted monthly by Agent to Owner by wire transfer or ACH payment at the address specified herein or as Owner may otherwise direct in writing. Owner and Agent may elect to retain, disburse, or remit funds in such other manner as may be mutually agreed on. Agent shall also render to Owner a statement showing all amounts received and disbursed for the period reported.

2.4. Agent will establish a separate bank account for the Property and will use that account for the deposit of all revenues from the Property and the disbursement of all payments relating to the Property.

2.5. Agent shall make all commercially reasonable efforts to effectively and efficiently manage the Property, including the monitoring of independent contractors responsible for the repair and maintenance and other services related to the Property. Agent shall arrange for, coordinate, supervise, administer, and manage on behalf and for the account and at the expense of Owner all activities and services required for the management, operation, and maintenance of the Property in a manner normally associated with high quality, comparable medical office buildings in the <INSERT NAME OF PROPERTY’S CITY AND STATE> area, in a manner and condition that is at least as good as the condition in which the Property is presently maintained, and consistent with the standards applied by Agent and “Affiliates of Agent” (defined below) with respect to the management of all other properties owned by Agent or Affiliates of Agent during the period that they were previously managed by Agent on behalf of various Affiliates of Agent, subject to the terms of this Agreement. On the basis of and consistent with the “Budget” (defined below), Agent shall execute on behalf of Owner, contracts for water, electricity, gas, fuel, oil, landscape maintenance, security services, cleaning, copier rental, sign service, vending, telephone, vermin extermination, trash removal, and other necessary services as necessary (collectively, “Service Contracts”). Service Contracts which are (a) entered into in arms length transactions and in accordance with the terms of the Budget, (b) for a term length of no more than one (1) year, and (c) cancelable by Owner, or by Agent on behalf of Owner, on thirty (30) days written notice without any termination fee or penalty shall not require Owner’s prior approval. All other Service Contracts shall require Owner’s prior written approval. Agent shall obtain written approval from Owner before entering into any contract or agreement with any Affiliates of Agent and in all events such contracts or agreements must be on commercially reasonable and market terms. When taking bids or issuing purchase orders, Agent shall act at all times on behalf of Owner and shall be under a duty to secure for and credit to Owner any discounts, commissions, or rebates obtained as a result of such purchases. Agent shall, at the time of taking bids, disclose to Owner any other relationship existing or contemplated with such bidder. Notwithstanding any of the foregoing, in no event shall Agent enter into any Service Contract that is intended to provide income to Owner without Owner’s prior written approval.

2.6. Agent, in its capacity as property manager, shall use its commercially reasonable efforts to cause or enable Owner: (a) to comply with all duties and obligations of Owner as

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“landlord” or “tenant”, as the case may be, (exclusive of those duties and obligations, if any, which by their nature must be performed by Owner) under all leases, rental agreements, and ground leases affecting the Property, and (b) not to permit any default to occur thereunder on the part of Owner as such “landlord” or “tenant”. Agent shall promptly prepare, deliver, coordinate and comply with any and all reporting requirements under any loan documents affecting the Property (including any and all leasing reports, development reports, accounting reports and financial statements). Agent shall promptly prepare, deliver to Owner for Owner’s approval, and only upon receipt of Owner’s approval, submit to any lender under such loan documents, any and all draw requests and other deliveries required under such loan documents in connection with draw requests and disbursements and, in connection with the foregoing, coordinate the draw request and disbursement process all in accordance with the requirements of such loan documents.

2.7. Agent, at Owner’s expense, shall make or cause to be made such alterations to the Property as Owner and Agent agree are necessary or desirable, or as required by the terms of leases or rental agreements, and replace, or cause to be replaced, damaged, worn, or inoperative equipment and fixtures.

2.8. Agent shall provide Owner, on request from time to time, a completed property questionnaire in the form reasonably requested by Owner. Agent, at Owner’s expense and within a reasonable time, shall provide, or cause to be provided, and shall coordinate and supervise all security services and systems necessary to protect the Property. Such services shall include implementation of a plan of evacuation or other appropriate action in the event of any emergency, which plan shall be circulated and demonstrated to all tenants or occupants of the Property. When an emergency occurs, Agent shall take whatever action it deems reasonable to protect, maintain, or repair the Property and to protect the occupants of the Property, and shall promptly notify Owner of any such action. For the purpose of this provision, an “emergency” means an event that, in Agent’s reasonable belief, will cause immediate threat of damage or injury to persons or property.

2.9. Subject to the provisions of this Section 2.9, Agent shall hire, prepare, insure, and enter into contracts with, supervise, and have the authority to terminate any independent contractors (on Owner’s behalf), and Property employees (on Agent’s behalf) reasonably required in the proper operation of the Property. Consistent with the Budget, Agent shall execute on behalf of Owner (without Owner’s co-signature or specific approval), such agreements with independent contractors (collectively, “Independent Contractor Agreements”) as are (a) entered into in arms length transactions and in accordance with the Budget, (b) for a term length of no more than one (1) year, and (c) cancelable by Owner, or by Agent on behalf of Owner, on thirty (30) days written notice without any termination fee or penalty. All other Independent Contractor Agreements shall require Owner’s prior written approval. Furthermore, notwithstanding the foregoing, Agent shall obtain Owner’s prior written approval before entering into any Independent Contractor Agreements with any Affiliates of Agent and in all events such contracts must be on commercially reasonable and market terms. Agent shall, at the time of taking bids, disclose to Owner any other relationship existing or contemplated with such bidder. Notwithstanding any of the foregoing, in no event shall Agent enter into any Independent Contractor Agreement that is intended to provide income to Owner without Owner’s prior written approval. All Property employees are Agent’s employees, not Owner’s. Agent shall prepare payroll tax returns and shall execute and file punctually when due all forms, reports, and returns required by law relating to the employment of personnel and to the operation of the Property.

2.10. Agent’s Property Manager shall receive tenant and other occupant communications on Owner’s behalf, shall coordinate and handle all relationships with, and complaints and requests from, tenants or occupants of the Property and shall use reasonable efforts to

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ensure tenant and occupant compliance with lease or rental agreement provisions. Agent shall maintain professional, business-like relationships with tenants and occupants and shall receive and respond timely to all tenants’ and occupants’ complaints and requests for services. Agent shall be required to respond to such complaints as may be directed by Owner, and Owner shall respond promptly indicating its approval or changes to any recommendation of Agent or its approval or changes to any itemized alternative.

2.11. Agent is not authorized to practice law. If Agent deems legal assistance necessary for any reason, including rent collection or tenant or occupant eviction, Agent shall obtain such assistance from legal counsel approved by Owner. Any legal fees, costs, and expenses shall be Owner’s responsibility and paid from Owner’s funds; provided that Owner has previously approved such fees and expenses in writing.

2.12. Agent shall supervise appraisers, counsel, and other consultants retained by Owner to evaluate Property value, performance, potential, and/or condition.

2.13. Agent shall appeal property assessments or tax valuations, on Owner’s request or on Agents reasonable estimate of success in reducing said assessments or tax valuations.

2.14. Agent shall supervise the property management function, perform inspections of property, and shall when appropriate make recommendations to Owner for changes, alterations, or capital improvements to enhance the value of the Property and optimize cash flow. Agent shall cause an inventory to be taken of all furniture and office equipment, and any other major equipment or material belonging to the Property. Said furniture and equipment will be used in the operation of the Property and Agent shall exert commercially reasonable efforts to maintain such assets in the condition delivered to Agent, ordinary wear and tear excepted.

2.15. Agent shall, on Owner’s request, procure financing on Owner’s behalf, including construction loans, permanent loans, refinancing of existing loans, or restructuring of Property debt and equity, or other types of financing on Owner’s written request.

2.16. Agent shall coordinate with local government and the community to facilitate beneficial interaction and communication.

3. Owner’s Responsibilities. Owner shall, if applicable, provide Agent with copies of all documentation and records in Owner’s possession, to allow Agent to perform its duties arising out of this Addendum.

4. Annual Budget. Not later than ninety (90) days before each calendar year during the Term, Agent shall prepare and present to Owner an annual budget (the “Budget”) showing in reasonable detail for such year the following:

• With respect to management of the Property, Agent’s month-to-month estimate of (a) projected rents, receipts and other revenues, (b) projected expenses, and (c) projected occupancy levels.

• With respect to capital improvements and replacements of and additions to furniture, fixtures and equipment for the Property, (a) a list of capital needs for such year for improvements, furniture, fixtures, and operating equipment, including a five (5) year projection of such items, (b) the projected cost of the items on such list, and (c) the anticipated schedule for the purchase and/or completion of such items.

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4.1. Owner shall have thirty (30) days from receipt of the Budget to approve it. Owner shall be deemed to have approved the Budget unless within such thirty (30) days, Owner notifies Agent in writing of its disapproval and the specific items contained in the Budget which it disapproves. If Owner disapproves the Budget, Agent shall submit to Owner a revised Budget within fifteen (15) days after receipt of notice of Owner’s disapproval, and Owner shall then have fifteen (15) days after receipt of the revised Budget to approve or disapprove the Budget as so revised.

4.2. If Owner has not approved the Budget by December 1^st , Agent shall manage, operate, and maintain the Property to the extent practicable in accordance with the Budget for the preceding calendar year until such time as Owner approves a budget for the then current year.

4.3. Notwithstanding the limitations of the Budget, Agent, without Owner’s prior consent, may expend Owner’s funds not provided for in the Budget for emergency maintenance and repairs of the Property which Agent in good faith reasonably believes to be necessary to avoid the suspension of essential services to the Property or to prevent, or minimize the risk of, injury to persons or property in or about the Property. Agent shall notify Owner of and account to Owner for any such expenditures as soon as reasonably possible after they are made.

4.4. As of the Effective Date, Agent has submitted to Owner, and Owner has approved, the Budget attached hereto as Exhibit A for <INSERT YEAR> with respect to the Property.

5. Fees. Owner shall pay Agent as the monthly fee for its property management services hereunder four percent (4%) of all gross monthly collections (including any parking revenues) from the Property, including collections made by Owner or others designated by Owner, but excluding prepaid rents or lease termination payments (except to the extent such rents or payments are applied for such month) (the “Monthly Property Management Fee”). Notwithstanding the foregoing, if on or prior to the Effective Date Pacific Medical Buildings LLC or an “Affiliate” (as defined in the Management Agreement) of Pacific Medical Buildings LLC (collectively, “Affiliates of Agent”) entered into an agreement or other arrangement with any tenant, occupant, hospital or other third party, restricting the amount of the monthly property management fee permitted to be passed through to the tenants or occupants of the Property to an amount less than four percent (4%) of gross monthly collections from the Property, then the Monthly Property Management Fee shall be reduced to such lesser amount. “Gross monthly collections” means the grand total of all rents (base and additional rent), security deposits (only when applied or forfeited), and other monies accrued that are collected during the month from the Property, or that have been previously collected and are applied during such month. In no event shall Agent’s monthly fee be less than $500, which amount is recognized by Owner and Agent as a reasonable minimum amount for services rendered hereunder. Owner will also pay for any additional reasonable costs or expenses that Agent incurs as a result of the extra expense above standard GAAP accounting required for SOX/SEC compliance in accordance with Section 2.4 of the Management Agreement. All expenses relating to personnel (including independent contractors, building engineers and the Property Managers) who work exclusively at the Property and/or who provide services to the Property and whose time can be reasonably allocated to the Property are in addition to Agent’s fee. Owner shall not be obligated to reimburse Agent for any expenses for off-site office equipment or off-site office supplies of Agent, for any overhead expenses of Agent incurred with respect to its general offices, or for any salaries, benefits, or wages allocable to time spent on projects other than the Property. Owner shall not be obligated to reimburse Agent for any obligations or expenses resulting from the gross negligence, fraud, or willful misconduct of Agent, nor for the failure of Agent to perform its material obligations and duties under this Agreement.

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If there is a conflict between the terms of this Addendum and those of the Management Agreement, the terms of the Management Agreement shall prevail. Initial-capitalized terms defined in the Management Agreement and used in this Addendum shall have the same meaning as defined in the Management Agreement.

end Addendum

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Exhibit A to Addendum A

INITIAL BUDGET

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Addendum B

CONSTRUCTION MANAGEMENT

This Addendum B (this “Addendum”) is attached to and made a part of the Asset and Property Management Agreement (the “Management Agreement”).

Owner authorizes Agent to manage, supervise, and provide construction management services for the Property, in the general capacity as identified below and more completely described within this Addendum.

x Construction and/or demolition of one or more buildings or structures at the Property.

x Construction, refurbishment or modification and/or demolition of portions or the whole of the common areas in or on one or more buildings or structures at the Property.

x Construction and/or demolition of tenant improvements within existing or future buildings at the Property.

1. Term. The commencement and termination dates of this Addendum shall coincide with the respective dates as described in the Management Agreement, subject to earlier termination as set forth therein.

2. Agent’s Responsibilities.

2.1. Agent shall provide as-needed supervision of all construction and administrative personnel required for each construction project, including any contractors, consultants, legal counsel, and accounting personnel. All employees (except independent contractors retained by Agent on behalf of Owner from time to time) shall be employed directly by Agent who shall be solely responsible for fulfilling all payroll tax functions with respect to the same.

2.2. Agent shall use commercially reasonable due diligence in the construction management for each project and furnish the full services of its organization in the management of such project.

2.3. Agent shall review and approve the monthly billings of the general contractor (which billings shall be subject to inspection by Owner at all times).

2.4. Agent shall procure and maintain such public liability and fire insurance for each project as directed by Owner with Owner and Agent named as additional insureds.

2.5. Agent shall not be obligated to make any monetary advance or incur any liability for the account of the Owner.

2.6. Agent shall diligently oversee and coordinate any capital improvements for the Property pursuant to plans approved from time to time by Owner (including any so-called “Required Repairs” or “Scheduled Renovations” as may be required by any loan documents affecting the Property and all approved plans, budgets and schedules therefor).

3. Owner’s Responsibilities.

3.1. Owner shall procure and maintain adequate property damage and public liability insurance for the Property in accordance with Section 5.3 of the Management Agreement, and shall name Agent as an additional insured in accordance with

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Section 5.5 of the Management Agreement. Owner shall provide Agent with a copy of such insurance policy as available in accordance with Section 5.6 of the Management Agreement.

3.2. Agent shall at no time be obligated to advance funds on behalf of Owner.

4. Fees. During the Term and with respect to any construction project which is not subject to a separate development agreement between Owner (or its Affiliate) and Agent (or Affiliates of Agent), Owner shall pay Agent a construction management fee calculated based on all direct construction costs incurred for each construction project (such costs, for each construction project, the “Construction Costs”), relating to: (a) the construction or demolition of buildings at the Property to the extent such construction or demolition is done after the completion of the initial construction, or (b) any second generation tenant improvements at the Property after the initial construction of the Property, whether done by Agent or by a tenant or occupant. Owner shall pay Agent (i) ten percent (10%) of the Construction Costs with respect to the first Seventy-Five Thousand Dollars ($75,000) of the Construction Costs, and (ii) five percent (5%) of the Construction Costs with respect to any Construction Costs in excess of Seventy Five Thousand Dollars ($75,000), if applicable. (For example, if the Construction Costs associated with a particular project total $100,000, Agent would receive construction management fees totaling $8,750 (i.e., (0.10 x $75,000) + (0.05 x $25,000)), and if the Construction Costs associated with a particular project total $70,000, Agent would receive construction management fees totaling $7,000 (i.e., 0.10 x $70,000).) The construction management fee shall be considered earned as Construction Costs are incurred for the project and shall be payable monthly (subject to a ten percent (10%) retention) on a percentage basis of total cost versus work completed and accepted. Any commissions, fees, or expenses of any third party construction managers shall be paid by Agent from this fee.

If there is a conflict between the terms of this Addendum and those of the Management Agreement, the terms of the Management Agreement shall prevail. Initial-capitalized terms defined in the Management Agreement and used in this Addendum shall have the same meaning as defined in the Management Agreement.

end Addendum

<        > - ASSET AND PROPERTY MANAGEMENT AGREEMENT

Addendum B – Page 2

R-17

Addendum C

LEASING

This Addendum C (this “Addendum”) is attached to and made a part of the Asset and Property Management Agreement (the “Management Agreement”).

1. Term. The commencement and termination dates of this Addendum shall coincide with the respective dates as described in the Management Agreement, subject to earlier termination as set forth therein. If the Management Agreement is terminated in whole or with respect to the “Property Management Services” (as defined in the Management Agreement), concurrently with such termination, Agent shall supply Owner with a list (the “List”) of tenants or occupants with whom Agent has been actively negotiating new leases or rental agreements for the Property and with whom Agent has exchanged draft letters of intent or draft term sheets (and Agent shall concurrently therewith supply Owner with copies of such draft letters of intent and/or draft term sheets). Owner shall pay to Agent the fees set forth in Section 4.1 below (subject to Section 4.3 below) for any new lease or rental agreement entered into by Owner and any tenant or occupant on the List, if (and only if) such new lease or rental agreement is fully executed within one hundred eighty (180) days of such termination.

2. Agent’s Responsibilities. Agent shall work diligently and use commercially reasonable efforts to procure tenants or occupants for the leasing or rental of the Property, including hiring, supervising, and terminating leasing brokers to assist in the leasing of available spaces, provided that such leasing brokers are not “Affiliates of Agent” (as defined in Addendum A to the Management Agreement) and charge customary market fees. Agent shall seek to fully lease and market the Property in at least an equal and comparable manner to the management, leasing and marketing efforts of Agent and Affiliates of Agent with respect to other properties which Agent or any Affiliates of Agent own, has an interest in, or manages, and shall not induce any of the tenants or occupants of the Property to vacate or terminate any of their leases or rental agreements at any of the properties owned by Owner or its “Affiliates” (as defined in the Management Agreement) in favor of relocating to any other property which Agent or any Affiliates of Agent owns, has an interest in, or manages. Agent shall prepare all leases, rental agreements, and modifications thereof including new leases, rental agreements, renewals, amendments, extensions, modifications, terminations, and all other such documents as may be necessary for the duties of Agent described herein and to the extent permitted pursuant to Section 5 of this Addendum C, Agent shall execute, on Owner’s behalf (and without Owner’s specific approval) such documents. Agent shall furnish Owner a fully executed original of said documents. Agent shall execute such listing agreements as are necessary to perform this function, and Owner shall be responsible for payment of all commissions due under the listing agreements to the extent such amounts have been itemized in the “Budget” (as defined in Addendum A to the Management Agreement).

3. Owner’s Responsibilities. Owner shall provide Agent with all such reasonable documentation and information necessary for Agent to perform its duties as described herein.

4. Fees.

4.1. With respect to any new lease or rental agreement for the Property, Owner shall pay Agent 5% of the gross revenues from such lease or rental agreement over the initial five (5) year lease term and 2.5% of the gross revenues of any part of the initial term beyond five (5) years. Leasing fees shall be payable half on execution of the lease or rental agreement and half upon Agent’s receipt of the tenant’s or occupant’s payment of its first (1^st) month of base rent under such lease or rental agreement.

4.2. For renewal of any lease or rental agreement (including options to extend/renew), Owner shall pay Agent 2.5% of gross revenues from such lease or rental agreement over the entire renewal term, payable on renewal.

<        > - ASSET AND PROPERTY MANAGEMENT AGREEMENT

Addendum C – Page 1

R-18

4.3. Any leasing commissions paid to an outside broker shall be paid by Agent up to the amount of Agent’s fee described above.

If there is a conflict between the terms of this Addendum and those of the Management Agreement, the terms of the Management Agreement shall prevail. Initial-capitalized terms defined in the Management Agreement and used in this Addendum shall have the same meaning as defined in the Management Agreement.

5. Leasing Guidelines. Owner and Agent have adopted for the Property the Leasing Guidelines set forth in the attached Exhibit A to this Addendum C. Agent shall adhere to the Leasing Guidelines but retains the right to deviate from the Leasing Guidelines as it sees fit in the exercise of its commercially reasonable discretion during each leasing process; provided that Agent shall not, without Owner’s prior, written consent, not to be unreasonably withheld, conditioned, or delayed, have such discretion with respect to any Property tenant or occupant whose lease represents more than ten percent (10%) of the Property’s rentable square footage. Owner and Agent shall annually review the Leasing Guidelines in good faith during the Term and make such revisions thereto as they agree. Agent shall have the right to review and propose additional reasonable changes to the Leasing Guidelines at other times if certain conditions exist which necessitate such changes (provided that Owner shall have the right, in its reasonable discretion, to accept or reject such proposals).

end Addendum

<        > - ASSET AND PROPERTY MANAGEMENT AGREEMENT

Addendum C – Page 2

R-19

Exhibit A to Addendum C

LEASING GUIDELINES

<Parties to attach Leasing Guidelines only if there are anticipated vacancies and/or lease expirations within the current Budget period. Otherwise, Leasing Guidelines will be established, as necessary, during the Budget process.>

end Exhibit

<        > - ASSET AND PROPERTY MANAGEMENT AGREEMENT

Exhibit A to Addendum C

R-20

Addendum D

ASSET MANAGEMENT

This Addendum D (this “Addendum”) is attached to and made a part of the Asset and Property Management Agreement (the “Management Agreement”).

1. Term. The commencement and termination dates of this Addendum shall coincide with the respective dates as described in the Management Agreement, subject to earlier termination as set forth therein.

2. Agent’s Asset Management Responsibilities. Agent’s duties and responsibilities in connection with the Property’s asset management shall be as follows:

2.1. Agent shall prepare, on a quarterly basis, market/competitive analysis that includes specific comparisons of the market and Owner’s competitors to the performance of the Property;

2.2. Agent shall conduct periodic meetings with the management personnel of any hospital tenants or occupants of the Property to review opportunities for further development and/or Property improvements;

2.3. Agent shall analyze and recommend solutions to potential problems at the Property and related campus/physician issues;

2.4. Agent shall perform oversight with respect to the preparation and compliance of the annual business plan;

2.5. Agent shall conduct quarterly review of the Property’s performance; and

2.6. Agent shall insure that the Property and all other assets that are managed by Agent for the benefit of Owner or its Affiliates are operated in a manner that shall not disqualify Owner or its Affiliates from being taxed as a real estate investment trust under Sections 856-859 of the United States Internal Revenue Code of 1986, as reasonably determined by Owner or its Affiliates (but Agent shall not be responsible to determine such manner, it being Owner’s responsibility to advise Agent thereof in writing from time to time).

3. Owner’s Responsibilities. Owner shall provide Agent with all such reasonable documentation and information necessary for Agent to perform its duties as described herein.

4. Fees. Owner shall pay Agent for its asset management services, on a quarterly basis, an amount equal to one-fourth ( ¹/4) of the annual fee, which annual fee shall be equal to sixty-five hundredths of one percent (0.65%) of all gross annual collections (including any parking revenues) from the Property, including collections made by Owner or others designated by Owner, but excluding prepaid rents or lease termination payments (except to the extent such rents or payments are applied for such year). “Gross annual collections” means the grand total of all rents (base and additional rent), security deposits (only when applied or forfeited), and other monies accrued that are collected during the applicable year from the Property or that have been previously collected and are applied during such year.

If there is a conflict between the terms of this Addendum and those of the Management Agreement, the terms of the Management Agreement shall prevail. Initial-capitalized terms defined in the Management Agreement and used in this Addendum shall have the same meaning as defined in the Management Agreement.

end Addendum

<        > - ASSET AND PROPERTY MANAGEMENT AGREEMENT

Addendum D – Page 1

R-21

INTENDING TO BE LEGALLY BOUND, the parties have signed this Management Agreement as of the Effective Date.

OWNER:

NHP/PMB Chula Vista, LLC

a Delaware limited liability company

By:
Print:
Title:
AGENT:
PMB REAL ESTATE SERVICES LLC a Delaware limited liability company
By:
	Claude Hooton, President

<        > - ASSET AND PROPERTY MANAGEMENT AGREEMENT

Addendum D – Page 2

R-22

EX-10.2

Exhibit 10.2

NATIONWIDE HEALTH PROPERTIES, INC.

[FORM OF] 1989 STOCK OPTION PLAN AS AMENDED AND RESTATED APRIL 20, 2001

STOCK OPTION AGREEMENT

THIS STOCK OPTION AGREEMENT is entered into as of this [    ] day of [                    ], [            ], between NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (hereinafter called the “Corporation”), and [                ], an officer, director and/or employee of the Corporation or one of its subsidiaries (hereinafter called “Optionee”).

WHEREAS, the Corporation desires to carry out the purpose of the Nationwide Health Properties, Inc. 1989 Stock Option Plan as amended and restated April 20, 2001 (the “Plan”) by providing Optionee an opportunity to purchase shares of the Corporation’s $.10 par value Common Stock and to receive dividend equivalents, all upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto have agreed, and do hereby agree, as follows:

1. Definitions. As used herein, the following terms shall have the following meanings:

(a) “Committee” shall mean the Committee defined in Paragraph 2(k) of the Plan and designated pursuant to Paragraph 3(a) of the Plan to administer the Plan.

(b) “Common Stock” shall mean shares of the Corporation’s common stock, $.10 par value, subject to adjustment pursuant to Paragraph 9 hereunder.

(c) “Dividend Equivalent” shall mean the additional right, when earned, of an Optionee to receive for each Dividend Equivalent an amount equal to the actual dividend declared per share of Common Stock with such amount to be credited to Optionee as of the dividend payment date.

(d) “Fair market value” shall mean the fair market value of the Common Stock as determined in accordance with any reasonable valuation method selected by

the Committee, including the valuation methods described in Treasury Regulations Section 20.2031-2. Unless determined otherwise by the Committee, “fair market value” shall be as applied to any date specified herein, the closing price of a share of Common Stock as reported in the Wall Street Journal on such date, or if no such sales were made on such date, the closing price of such share as reported in the Wall Street Journal on the next preceding date on which there were such sales.

(e) “Incentive Stock Option” shall mean an Option designated as such by the Committee at the time of grant pursuant to Paragraph 2 hereof and which is an “incentive stock option” within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended.

(f) “Non-Qualified Stock Option” shall mean an Option which is not an Incentive Stock Option.

(g) “Option” or “Stock Option” shall mean the right to purchase shares of Common Stock pursuant to Paragraph 2 of this Agreement.

(h) “Option Price” shall mean the purchase price per share of Common Stock hereunder.

(i) “Option Shares” shall mean Common Stock covered by and subject to any outstanding unexercised Option granted pursuant to this Agreement.

(j) “Optionee” shall mean the person named above to whom an Option has been granted pursuant to this Agreement.

(k) “Plan” shall refer to Nationwide Health Properties, Inc. 1989 Stock Option Plan, as amended and restated April 20, 2001, pursuant to which this Agreement is being executed.

2. Grant of Option. The Corporation hereby irrevocably grants to Optionee the right and Option to purchase all or any part of that number of Option Shares which is set forth on page 9 hereof (such number being subject to adjustment as provided in Paragraph 9 hereof) on the terms and conditions set forth herein, said Option to be designated as Incentive Stock Options and/or Non-Qualified Stock Options as set forth on page 9 hereof.

3. Exercise Price. The exercise price of the Option Shares covered by the Option granted pursuant to this Agreement shall be that price which is set forth on page 9 hereof.

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4. Terms of Option.

(a) Option Period. The Option and all rights and obligations thereunder shall expire ten (10) years from the date of this Agreement in the case of Incentive Stock Options and eleven (11) years from the date of this Agreement in the case of Non-Qualified Stock Options, and each Option shall be subject to earlier termination as provided elsewhere herein. Except as otherwise provided elsewhere herein, if Optionee shall not in any given period exercise any part of the Option which has become exercisable during that period, Optionee’s right to exercise such part of the Option shall continue until expiration of the Option, or part thereof, as provided herein.

(b) Exercise. No Option shall become exercisable until [one] year following the date of this Agreement, and shall, except as provided in Paragraph 4(h) hereof, thereafter be exercisable as set forth on page 9 hereof. No Option, or part thereof, shall be exercisable except with respect to whole shares of Common Stock, and fractional share interests shall be disregarded except that they may be accumulated.

(c) Notice and Payment. Subject to the provisions contained herein, the Option granted herein shall be exercised by written notice delivered to the Corporation, specifying the number of Option Shares with respect to which the Option is being exercised, together with concurrent payment in full of the exercise price as hereinafter provided. If the Option is being exercised by any person or persons other than Optionee, said notice shall be accompanied by proof, satisfactory to the counsel for the Corporation, of the right of such person or persons to exercise the Option. The Corporation’s receipt of a notice of exercise without concurrent receipt of the full amount of the exercise price shall not be deemed an exercise of the Option by Optionee, and the Corporation shall have no obligation to Optionee for any Option Shares unless and until full payment of the exercise price is received by the Corporation and all of the terms and provisions of this Agreement have been fully complied with.

(d) Payment of Exercise Price. The exercise price of any Option Shares purchased upon the proper exercise of the Option shall be paid in full at the time of each exercise of the Option, or part thereof, in cash or check and/or, subject to Paragraph 5(b) hereof, in Common Stock of the Corporation which, when added to the cash payment, if any, has an aggregate Fair Market Value equal to the full amount of the exercise price of the Option, or part thereof, then being exercised. Payment by Optionee as provided herein shall be made in full concurrently with Optionee’s notification to the Corporation of his or her intention to exercise all or part of the Option. If all or any part of a payment is made in shares of Common Stock as heretofore provided, such payment shall be deemed to have been made only upon receipt by the Corporation of all required share certificates, and all stock powers and all other required transfer documents necessary to transfer the shares of Common Stock to the Corporation. In addition, Options may be exercised and payment made by delivering a properly executed exercise notice together with irrevocable instructions to a broker or bank to promptly deliver to the Corporation the amount of sale proceeds necessary to pay the exercise price and any applicable tax

3

withholding; the date of exercise shall be deemed to be the date the Corporation receives the notice.

(e) Minimum Exercise. Not less than ten (10) Option Shares may be purchased at any one time upon exercise of the Option unless the number of shares purchased is the total number which remains to be purchased under the Option.

(f) Prior Outstanding Incentive Stock Options. Incentive Stock Options herein granted to Optionee shall be exercisable even while Optionee has outstanding and unexercised any Incentive Stock Option previously granted to him or her pursuant to the Plan or any other Incentive Stock Option Plan of the Corporation or any Subsidiary. An Incentive Stock Option shall be treated as outstanding until it is exercised in full or expires by reason of lapse of time, or is otherwise cancelled by mutual action of Optionee and the Corporation.

(g) Compliance With Law. No shares of Common Stock shall be issued upon exercise of the Option, and Optionee shall have no right or claim to such shares, unless and until: (i) payment in full has been received by the Corporation; (ii) in the opinion of the counsel for the Corporation, all applicable requirements of law and of regulatory bodies having jurisdiction over such issuance and delivery have been fully complied with; and (iii) if required by federal or state law or regulation, Optionee shall have paid to the Corporation the amount, if any, required to be withheld on the amount deemed to be compensation to Optionee as a result of the exercise of his or her Option, or made other arrangements satisfactory to the Corporation, in its sole discretion, to satisfy applicable income tax withholding requirements.

(h) Reorganization. Notwithstanding any provision herein pertaining to the time of exercise of the Option, or part thereof, upon adoption by the requisite holders of the outstanding shares of Common Stock of any plan of dissolution, liquidation, reorganization, merger, consolidation or sale of all or substantially all of the assets of the Corporation to another corporation which would, upon consummation, result in termination of the Option in accordance with Paragraph 15 hereof, the Option herein granted shall become immediately exercisable (but in no event shall be exercisable during the first six months after they are granted if SEC Rule 16b-3, or any successor thereto, so provides) as to all unexercised Option Shares for such period of time as may be determined by the Committee, but in any event not less than 30 days, on the condition that the terminating event described in Paragraph 15 hereof is consummated.

5. Designation of Incentive Stock Options. If the Committee has designated the Option herein granted, or part thereof, as Incentive Stock Options, said designation being so indicated on page 9 hereof, such Incentive Stock Options shall be subject to the following requirements:

4

(a) Disposition. Optionee shall not upon the exercise of an Incentive Stock Option dispose of such Common Stock shares thereby transferred to him or her within two years from the date of this Agreement nor within one year after such transfer of such shares.

(b) Transfer of Statutory Option Stock. In no event may any Incentive Stock Option be exercised hereunder by transfer of statutory option stock (as defined in Section 425(c)(3)(B) of the Internal Revenue Code of 1986, as amended) if the applicable holding period requirements (under Section 422(a)(1), 422A(a)(l), 423(a)(1), or 424(a)(1) of the Internal Revenue Code of 1986, as amended) have not been met with respect to such statutory option stock before such transfer.

6. Non-Qualified Stock Options. The Option herein granted, or part thereof, shall be deemed Non-Qualified Stock Options under this Agreement if the Option Shares subject to said Option: (i) are designated at the time of grant as Incentive Stock Options but do not so qualify under the provisions of Paragraph 5 hereof or under the provisions of Section 422A of the Internal Revenue Code of 1986, as amended, or any regulations or rulings issued by the Internal Revenue Service or under any provisions of the Plan for any reason; or (ii) are designated at the time of grant on page 9 hereof as Non-Qualified Stock Options.

7. Dividend Equivalents. The Corporation hereby irrevocably grants to Optionee the right to receive that number of Dividend Equivalents set forth on page 9 hereof (such number being subject to adjustment as provided in Paragraph 9 hereof) on the terms and conditions set forth herein. The Dividend Equivalents shall be based on the dividends declared on the Corporation’s Common Stock and shall be credited and payable as of the dividend payment dates that occur during the period commencing on the first dividend payment date after the date of grant and, to the extent required to avoid the imposition of taxes under Section 409A of the Internal Revenue Code of 1986, as amended, terminating on the earlier of (i) Optionee’s termination of employment or service with the Corporation or (ii) the expiration of the Option according to its terms (i.e., ten (10) years from the date of this Agreement in the case of Incentive Stock Options and eleven (11) years from the date of this Agreement in the case of Non-Qualified Stock Options), regardless of whether or when such Option is exercised. The Dividend Equivalents shall be payable in cash or additional shares of Common Stock by such formula and subject to such conditions as may be determined by the Plan Committee. For purposes of this Agreement, Optionee’s termination of employment or service with the Corporation shall include termination of employment or service with a Subsidiary and cessation of affiliation with the Corporation or a Subsidiary.

8. Non-transferability. Except as provided elsewhere in this Agreement or in the Plan, each Option and each Dividend Equivalent shall, by its terms, be nontransferable by Optionee other than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act, or the rules thereunder. Incentive Stock Options shall be exercisable during the lifetime of the Optionee only by the Optionee.

5

9. Adjustment Upon Changes in Capitalization. If the outstanding shares of Common Stock of the Corporation are increased, decreased, or changed into or exchanged for a different number or kind of shares or securities of the Corporation, through a reorganization, merger, recapitalization, reclassification, stock split, stock dividend, stock consolidation, or otherwise, without consideration to the Corporation, or if there is a spin-off or other distribution of stock or property with respect to the holders of the Common Stock other than normal cash dividends, an appropriate and proportionate adjustment shall be made in the number and kind of shares as to which Stock Options may be granted. A corresponding adjustment changing the number or kind of Option Shares and the exercise prices per share allocated to unexercised Stock Options, or portions thereof, which shall have been granted prior to any such change, shall likewise be made. Such adjustments shall be made without change in the total price applicable to the unexercised portion of the Stock Option, but with a corresponding adjustment in the price of each share subject to the Stock Option. An appropriate adjustment shall also be made under this paragraph to the number of Dividend Equivalents. Adjustments under this Paragraph shall be made by the Committee, whose determination as to what adjustments shall be made, and the extent thereof, shall be final and conclusive. No fractional shares of stock shall be issued or made available hereunder on account of such adjustments, and fractional share interests shall be disregarded, except that they may be accumulated.

10. Continuation of Affiliation. Nothing contained in this Agreement shall obligate the Corporation or any Subsidiary to employ or continue to employ or remain affiliated with Optionee for any period of time or interfere in any way with the right of the Corporation or a Subsidiary to reduce or increase Optionee’s compensation.

11. Cessation of Affiliation. Except as provided in Paragraph 12 hereof, if, for any reason other than disability or death, Optionee ceases to be affiliated with the Corporation or a Subsidiary, the Option herein granted shall expire on the expiration dates specified herein for said Option, or three (3) months after Optionee ceases to be so affiliated, whichever is earlier. During such period after cessation of affiliation, such Option shall be exercisable only as to those increments, if any, which had become exercisable as of the date on which Optionee ceased to be affiliated with the Corporation or the Subsidiary, and any Option or increments which had not become exercisable as of such date shall expire automatically on such date.

12. Termination for Cause. If Optionee’s employment by or affiliation with the Corporation or a Subsidiary is terminated for cause, the Option herein granted shall automatically expire and terminate in its entirety immediately upon such termination; provided, however, that the Committee may, in its sole discretion, within thirty (30) days of such termination reinstate such Option by giving written notice of such reinstatement to the Optionee. In the event of such reinstatement, Optionee may exercise the Option only to such extent, for such time, and upon such terms and conditions as if Optionee had ceased to be employed by or affiliated with the Corporation or a Subsidiary upon the date of such termination for a reason other than cause, disability or death. Termination for cause shall include, but shall not be limited to, termination for malfeasance or gross misfeasance in the performance of duties or conviction

6

of illegal activity in connection therewith and, in any event, the determination of the Committee with respect thereto shall be final and conclusive.

13. Death of Optionee. If Optionee dies while employed by or affiliated with the Corporation or a Subsidiary, or during the three-month period referred to in Paragraph 11 hereof, the Option herein granted shall expire on the expiration dates specified herein for said Option, or one (1) year after the date of such death, whichever is earlier. After such death, but before such expiration, subject to the terms and provisions of the Plan and this Agreement, the person or persons to whom Optionee’s rights under the Option shall have passed by will or by the applicable laws of descent and distribution, or the executor or administrator of the Optionee’s estate, shall have the right to exercise such Option to the extent that increments, if any, had become exercisable as of the date on which Optionee died.

14. Disability of Optionee. If Optionee is disabled while employed by or affiliated with the Corporation or a Subsidiary, or during the three-month period referred to in Section 11 hereof, the Option herein granted shall expire on the expiration dates specified herein, or one (1) year after the date such disability occurred, whichever is earlier. After such disability occurs, but before such expiration, Optionee or the guardian or conservator of Optionee’s estate, as duly appointed by a court of competent jurisdiction, shall have the right to exercise such Option to the extent that increments, if any, had become exercisable as of the date on which Optionee became disabled or ceased to be employed by or affiliated with the Corporation or a Subsidiary as a result of the disability. Optionee shall be deemed to be “disabled” if it shall appear to the Committee, upon written certification delivered to the Corporation of a qualified licensed physician, that Optionee has become permanently and totally unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in Optionee’s death, or which has lasted or can be expected to last for a continuous period of not less than 12 months.

15. Terminating Events. Upon consummation of a plan of dissolution or liquidation of the Corporation, or upon consummation of a plan of reorganization, merger or consolidation of the Corporation with one or more corporations, as a result of which the Corporation is not the surviving entity, or upon the sale of all or substantially all the assets of the Corporation to another corporation, the Option herein granted and any applicable Dividend Equivalents shall be terminated, subject to provisions of Paragraph 4(h) hereof, unless provision is made in connection with such transaction for assumption of the Option and Dividend Equivalents herein granted, or substitution for such Option and Dividend Equivalents with new stock options and dividend equivalents covering stock of a successor corporation, or a parent or subsidiary corporation thereof, solely at the discretion of such successor corporation, or parent or subsidiary corporation, with appropriate adjustments as to number and kind of shares and prices and dividend equivalents.

16. Amendment and Termination. The Board of Directors of the Corporation may, at any time and from time to time, suspend, amend or terminate the Plan and may, with the consent of Optionee, make such modifications of the terms and conditions of the Option herein

7

granted and any applicable Dividend Equivalents as it shall deem advisable. Amendment, suspension, or termination of the Plan shall not (except as otherwise provided in Paragraph 9 hereof), without the consent of Optionee, alter or impair any rights or obligations under the Option and any applicable Dividend Equivalents herein granted.

17. Privileges of Stock Ownership; Retaliatory Law Compliance; Notice of Sale. No Optionee shall be entitled to the privileges of stock ownership as to any Option Shares not actually issued and delivered. No Option Shares may be purchased upon the exercise of the Option unless and until all then applicable requirements of all regulatory agencies having jurisdiction and all applicable requirements of the securities exchanges upon which securities of the Corporation are listed (if any) shall have been fully complied with. This paragraph 17 shall not limit or reduce any rights to Optionee with respect to applicable earned Dividend Equivalents.

18. Agreement and Representations of Optionee. Unless the shares of Common Stock covered by the Option herein granted have been registered with the Securities and Exchange Commission pursuant to the registration requirements under the Securities Act of 1933, Optionee shall: (i) by and upon accepting the Option, represent and agree in writing, for himself or herself and his or her transferees by will or the laws of descent and distribution, that the Option Shares will be acquired for investment purposes and not for resale or distribution; and (ii) by and upon the exercise of the Option, or part thereof, furnish evidence satisfactory to counsel for the Corporation, including written and signed representations to the effect that the Option Shares are being acquired for investment purposes and not for resale or distribution, and that the Option Shares being acquired shall not be sold or otherwise transferred by Optionee except in compliance with the registration provisions under the Securities Act of 1933, as amended, or an applicable exemption therefrom. Furthermore, the Corporation, at its sole discretion, to assure itself that any sale or distribution by Optionee complies with the Plan and any applicable federal or state securities laws, may take all reasonable steps, including placing stop transfer instructions with the Corporation’s transfer agent prohibiting transfers in violation of the Plan and affixing the following legend (and/or such other legend or legends as the Committee shall require) on certificates evidencing the shares:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF, WHICH OPINION SHALL BE ACCEPTABLE TO NATIONWIDE HEALTH PROPERTIES, INC., THAT REGISTRATION IS NOT REQUIRED.”

19. Notices. All notices and demands of any kind which may be required or which the Committee, Optionee, or any other person desires to give hereunder shall be in writing and shall be delivered in hand to the person or persons to whom addressed (in the case of the

8

Committee, with the Chief Executive Officer, Chief Financial Officer or Secretary of the Corporation), by leaving a copy of such notice or demand at the address of such person or persons as may be reflected in the records of the Corporation, or by mailing a copy thereof, properly addressed as above, by certified or registered mail, postage prepaid, with return receipt requested. Delivery by mail shall be deemed made upon receipt by the notifying party of the return receipt request acknowledging receipt of the notice or demand.

9

IN WITNESS WHEREOF, the Corporation has caused this Stock Option Agreement to be duly executed by an officer thereof thereunto duly authorized, and Optionee has hereunto set his hand, all effective as of the day and year first above written.

NATIONWIDE HEALTH PROPERTIES, INC.

By:

OPTIONEE

Number of Option Shares subject to Option:

             Incentive Stock Options

Purchase price per share $            

The above specified Incentive Stock Options shall be exercisable as follows:

[            ] shares on and after [                    ]

[            ] shares on and after [                    ]

[            ] shares on and after [                    ]

         Non-Qualified Stock Options

Purchase price per share $            

The above specified Non-Qualified Stock Options shall be exercisable as follows: in [three] equal annual installments on and after one year from the date of the grant

             Total Number of Dividend Equivalents

EX-10.15

Exhibit 10.15

AMENDED AND RESTATED

NATIONWIDE HEALTH PROPERTIES, INC.

2005 PERFORMANCE INCENTIVE PLAN

STOCK UNIT AWARD AGREEMENT

This amended and restated stock unit award agreement, effective as of December 31, 2008, hereby amends and restates that certain stock unit award agreement dated as of August 15, 2006 (the “Prior Agreement”), by and between Nationwide Health Properties, Inc., a Maryland corporation (the “Corporation”) and Douglas M. Pasquale (the “Executive”), with reference to the following:

WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), places certain restrictions, among other things, as to the timing and distributions from nonqualified deferred compensation plans and arrangements; and

WHEREAS, the Board of Directors of the Corporation desires to amend and restate the Prior Agreement to comply with Section 409A of the Code.

NOW THEREFORE, the Prior Agreement is hereby amended and restated in its entirety as follows:

THIS STOCK UNIT AWARD AGREEMENT (this “Agreement”) is dated as of August 15, 2006 by and between Nationwide Health Properties, Inc., a Maryland corporation (the “Corporation”), and Douglas M. Pasquale (the “Executive”).

W I T N E S S E T H

WHEREAS, pursuant to the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan (the “Plan”), the Corporation has granted to the Executive effective as of August 15, 2006 (the “Award Date”), a credit of stock units under the Plan (the “Award”), upon the terms and conditions set forth herein and in the Plan.

NOW THEREFORE, in consideration of services rendered and to be rendered by the Executive, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

1. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan.

2. Grant. Subject to the terms of this Agreement, the Corporation hereby grants to the Executive an Award with respect to an aggregate of 120,967.74 stock units (subject to adjustment as provided in Section 7.1 of the Plan) (the “Stock Units”). As used herein, the term “stock unit” shall mean a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock (subject to adjustment as provided in Section 7.1 of the Plan) solely for purposes of the Plan and this Agreement. The Stock Units shall be used solely as a device for the determination of the

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payment to eventually be made to the Executive if such Stock Units vest pursuant to Section 3. The Stock Units shall not be treated as property or as a trust fund of any kind.

3. Vesting. Subject to Section 8 below, the Award shall vest and become nonforfeitable with respect to fifty percent (50%) of the total number of Stock Units (subject to adjustment under Section 7.1 of the Plan) on the fifth anniversary of the Award Date, and with respect to ten percent (10%) of the total number of Stock Units (subject to adjustment under Section 7.1 of the Plan) on each of the sixth through tenth anniversaries of the Award Date.

4. Continuance of Employment. The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Agreement. Except as expressly provided in Sections 8(b) and 8(c), employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Executive to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 8 below or under the Plan.

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation, confers upon the Executive any right to remain employed by or in service to the Corporation or any Subsidiary, or affects the right of the Corporation or any Subsidiary to increase or decrease the Executive’s other compensation or benefits. Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Executive without his consent thereto.

5. Dividend and Voting Rights.

(a) Limitations on Rights Associated with Units. The Executive shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Section 5(b) with respect to Dividend Equivalent Rights) and no voting rights, with respect to the Stock Units and any shares of Common Stock underlying or issuable in respect of such Stock Units until such shares of Common Stock are actually issued to and held of record by the Executive. No adjustments will be made for dividends or other rights of a holder for which the record date is prior to the date of issuance of the stock certificate.

(b) Dividend Equivalent Rights. In the event that the Corporation pays an ordinary cash dividend on its Common Stock and the related dividend payment record date occurs at any time after the Award Date and before all of the Stock Units subject to the Award have either been paid pursuant to Section 7 or terminated pursuant to Section 8, the Corporation shall credit the Executive as of the last day of the calendar quarter in which such record date occurs (the “Crediting Date”) with an additional number of Stock Units equal to (i) the per-share cash dividend paid by the Corporation on its Common Stock with respect to such record date, multiplied by (ii) the total number of outstanding and unpaid Stock Units (including any dividend equivalents previously credited hereunder) (with such total number adjusted pursuant to Section 7.1 of the Plan and/or Section 9 hereof) subject to the Award as of such record date, divided by (iii) the fair market value of a share of Common Stock (as determined under the Plan) on the Crediting Date. Any Stock Units credited pursuant to the foregoing provisions of this Section 5(b) shall be subject to the same vesting, payment and other terms, conditions and

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restrictions as the original Stock Units to which they relate. No crediting of Stock Units shall be made pursuant to this Section 5(b) with respect to any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Section 8. Notwithstanding the above, 46/92 (the number of days remaining in the quarter after the Award Date divided by the total number of days in the quarter) of the dividend payable September 1, 2006, shall be payable in additional stock units on and applicable to the Stock Units and shall be credited on the Crediting Date of September 30, 2006.

(c) Special Crediting Date. Notwithstanding Section 5(b), if the vesting of the Award is accelerated in whole or in part upon a Change in Control Event or a termination of the Executive’s employment pursuant to Section 8 hereof (an “Acceleration Event”), and the Corporation pays an ordinary cash dividend on its Common Stock for which the related dividend payment record date occurs during the calendar quarter in which the Acceleration Event occurs and before the occurrence of such Acceleration Event, a Crediting Date shall be deemed to have occurred on the date of such Acceleration Event (a “Special Crediting Date”), and the Corporation shall credit the Executive as of such Special Crediting Date with an additional number of Stock Units equal to (i) the per-share cash dividend paid by the Corporation on its Common Stock with respect to each such record date, multiplied by (ii) the total number of outstanding and unpaid Stock Units (including any dividend equivalents previously credited hereunder) (with such total number adjusted pursuant to Section 7.1 of the Plan and/or Section 9 hereof) subject to the Award as of such record date, divided by (iii) the fair market value of a share of Common Stock on the Special Crediting Date. Any Stock Units credited pursuant to the foregoing provisions of this Section 5(c) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original Stock Units to which they relate. No crediting of Stock Units shall be made pursuant to this Section 5(c) with respect to any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Section 8. For purposes of clarity, the Executive will not be entitled to a credit of additional Stock Units under both Section 5(b) and this Section 5(c) with respect to any one dividend payment record date.

6. Restrictions on Transfer. Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily. The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

7. Timing and Manner of Payment of Stock Units. Except as provided below with respect to an Acceleration Event, on or as soon as administratively practicable following the vesting of the applicable portion of the Stock Units subject to the Award, and in no event later than the later of (i) the 15^th day of the third month following the end of the Executive’s taxable year in which any Stock Units subject to the Award became vested or (ii) the 15 ^th day of the third month following the end of the Corporation’s taxable year in which such vesting occurs, the Corporation shall deliver to the Executive a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of such Stock Units that vested during such calendar quarter (including any vested Stock Units credited in respect of Dividend Equivalent Rights for such calendar quarter pursuant to Section 5(b) hereof); provided,

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however, that the Executive may irrevocably elect, on a form and in a manner prescribed by the Administrator, to defer any such payment of vested Stock Units, provided that such election must not take effect until at least twelve (12) months after it is made, must be made no less than twelve (12) months before such payment would otherwise be made, must defer such payment for a period of not less than five (5) years, and must otherwise comply with any applicable requirements of Section 409A of the Code. Notwithstanding the foregoing sentence, upon the occurrence of an Acceleration Event, the Stock Units that have vested as of the date of such Acceleration Event (after giving effect to any accelerated vesting in connection with such event and the crediting of any Dividend Equivalent Rights pursuant to Section 5(c) hereof) shall be paid as soon as administratively practicable, and in no event later than the later of (i) the 15^th day of the third month following the end of the Executive’s taxable year in which such Acceleration Event occurs or (ii) the 15^th day of the third month following the end of the Corporation’s taxable year in which such Acceleration Event occurs; provided, however, that for any Stock Units becoming vested in connection with the Executive’s termination of employment without Cause or for Good Reason (each as defined in the Employment Agreement) or due to the Executive’s death or Disability (as defined below), if such termination of employment is not a “separation from service” within the meaning of Section 409A of the Code, then, to the extent necessary to avoid the imposition of any taxes under Section 409A of the Code, such Stock Units shall not become payable until after the earliest of, as soon as practicable and in no event later than sixty (60) days following (A) the date the Stock Units would have been paid absent the Acceleration Event, (B) the date of the Executive’s “separation from service” within the meaning of Section 409A of the Code, or (C) the date of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Corporation (each as determined in accordance with Section 409A of the Code). The Corporation’s obligation to deliver shares of Common Stock or otherwise make payment with respect to vested Stock Units is subject to the condition precedent that the Executive or other person entitled under the Plan to receive any shares with respect to the vested Stock Units deliver to the Corporation any representations or other documents or assurances required pursuant to Section 8.1 of the Plan. The Executive shall have no further rights with respect to any Stock Units that are paid pursuant to this Section 7 or that terminate pursuant to Section 8.

8. Effect of Change in Control or Termination of Employment.

(a) Change in Control. Upon the occurrence of a Change in Control Event as provided in Section 7.2 of the Plan, the Award shall become fully vested and non-forfeitable as of the date of the Change in Control Event.

(b) Termination of Employment Generally. Subject to Sections 8(c) and 8(d), the Executive’s Stock Units shall terminate to the extent such units have not become vested prior to the first date the Executive is no longer employed by the Corporation or one of its Subsidiaries, regardless of the reason for the termination of the Executive’s employment with the Corporation or a Subsidiary, whether with or without cause, voluntarily or involuntarily. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Executive, or the Executive’s beneficiary or personal representative, as the case may be.

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(c) Death or Disability. Notwithstanding Section 8(b) or any other provisions of this Agreement or the Plan, in the event that the Executive’s employment with the Corporation and its Subsidiaries terminates due to the Executive’s death or Disability (as defined below):

• at any time prior to the fifth anniversary of the Award Date, the Award shall vest and become nonforfeitable with respect to 1.6667% of the total number of Stock Units (subject to adjustment under Section 7.1 of the Plan) for each month of Executive’s employment with the Corporation (measured with reference to monthly anniversaries of the Award Date) after the Award Date and ending with the date of such termination of the Executive’s employment (rounded up to the nearest whole share); and

• at any time on or after the fifth anniversary of the Award Date, the Award shall become fully vested and nonforfeitable as of the date of such termination of the Executive’s employment.

For purposes of this Section 8(c), the term “Disability” shall have the meaning ascribed to such term in that certain Employment Agreement dated September 30, 2003 by and between the Corporation and the Executive (the “Employment Agreement”). Any Stock Units subject to the Award that are not vested after giving effect to the foregoing provisions of this Section 8(c) shall terminate as of the date of termination of the Executive’s employment. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Executive, or the Executive’s beneficiary or personal representative, as the case may be.

(d) Certain Terminations of Employment. Notwithstanding Section 8(b) or any other provision of this Agreement or the Plan, in the event that the Executive’s employment with the Corporation and its Subsidiaries is terminated (i) by the Corporation or a Subsidiary without Cause (as such term is defined in the Employment Agreement, and other than due to the Executive’s death or Disability) or (ii) by the Executive for Good Reason (as such term is defined in the Employment Agreement), the Award shall become fully vested and nonforfeitable as of the date of such termination of the Executive’s employment.

9. Adjustments Upon Specified Events. Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in accordance with such section in the number of Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Award. No such adjustment shall be made with respect to any ordinary cash dividend for which dividend equivalents are credited pursuant to Section 5(b).

10. Tax Withholding. Subject to Section 8.1 of the Plan and such rules and procedures as the Administrator may impose, upon any distribution of shares of Common Stock in respect of the Stock Units, the Corporation shall automatically reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value (with the “fair market value” of such shares determined in accordance with the

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applicable provisions of the Plan), to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates. In the event that the Corporation cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of the Stock Units, the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Executive and/or to deduct from other compensation payable to the Executive any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

11. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Chief Financial Officer, and to the Executive at the Executive’s last address reflected on the Corporation’s records, or at such other address as either party may hereafter designate in writing to the other. Any such notice shall be given only when received, but if the Executive is no longer an employee of the Corporation, shall be deemed to have been duly given by the Corporation when enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government.

12. Plan. The Award and all rights of the Executive under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference. The Executive agrees to be bound by the terms of the Plan and this Agreement. The Executive acknowledges having read and understanding the Plan, the Prospectus for the Plan, and this Agreement. Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Executive unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

13. Entire Agreement. This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing and signed by the Corporation. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Executive hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

14. Limitation on Executive’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Executive shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to Stock Units, as and when payable hereunder.

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15. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

16. Section Headings. The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

18. Section 409A. It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code. This Agreement shall be construed and interpreted consistent with that intent. Notwithstanding any provision to the contrary in this Agreement, to the extent necessary to avoid the imposition of any taxes under Section 409A of the Code, no payment or distribution under this Agreement that becomes payable by reason of the Executive’s termination of employment with the Corporation will be made to the Executive unless his termination of employment constitutes a “separation from service” (as such term is defined in Section 409A of the Code). For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Section 409A of the Code. If the Executive is a “specified employee” as defined in Section 409A of the Code and, as a result of that status, any portion of the payments under this Agreement would otherwise be subject to taxation pursuant to Section 409A of the Code, the Executive shall not be entitled to any payments upon a termination of his employment until the earlier of (i) the expiration of the six (6)-month period measured from the date of his “separation from service” (within the meaning of Section 409A of the Code) or (ii) the date of his death. Upon the expiration of the applicable Section 409A deferral period, all payments and benefits deferred pursuant to this Section (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to the Executive in a lump sum as soon as practicable, but in no event later than ten (10) days (or if the payment is being made following the Executive’s death, no later than sixty (60) days following the date of death), following such expired period, and any remaining payments due under this Agreement will be paid in accordance with the normal payment dates specified for them herein.

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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Executive has hereunto set his hand as of the date and year first above written.

NATIONWIDE HEALTH PROPERTIES, INC.			EXECUTIVE
A Maryland corporation
			/s/ Douglas M. Pasquale
By:	/s/ Abdo H. Khoury		Signature
Print Name:		Abdo H. Khoury
			Douglas M. Pasquale
Its:	Executive Vice President and Chief Financial and Portfolio Officer		Print Name

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CONSENT OF SPOUSE

In consideration of the execution of the foregoing Stock Unit Award Agreement by Nationwide Health Properties, Inc., I,                                         , the spouse of the Executive therein named, do hereby join with my spouse in executing the foregoing Stock Unit Award Agreement and do hereby agree to be bound by all of the terms and provisions thereof and of the Plan.

Dated:                             

Signature of Spouse

Print Name

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EX-10.19

Exhibit 10.19

AMENDED AND RESTATED

NATIONWIDE HEALTH PROPERTIES, INC.

2005 PERFORMANCE INCENTIVE PLAN

STOCK UNIT AWARD AGREEMENT

This amended and restated stock unit award agreement, effective as of December 31, 2008, hereby amends and restates that certain stock unit award agreement dated as of April 23, 2007 (the “Prior Agreement”), by and between Nationwide Health Properties, Inc., a Maryland corporation (the “Corporation”) and Abdo H. Khoury (the “Executive”), with reference to the following:

WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), places certain restrictions, among other things, as to the timing and distributions from nonqualified deferred compensation plans and arrangements; and

WHEREAS, the Board of Directors of the Corporation desires to amend and restate the Prior Agreement to comply with Section 409A of the Code.

NOW THEREFORE, the Prior Agreement is hereby amended and restated in its entirety as follows:

THIS STOCK UNIT AWARD AGREEMENT (this “Agreement”) is dated as of April 23, 2007 by and between Nationwide Health Properties, Inc., a Maryland corporation (the “Corporation”), and Abdo H. Khoury (the “Executive”).

W I T N E S S E T H

WHEREAS, pursuant to the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan (the “Plan”), the Corporation has granted to the Executive effective as of April 23, 2007 (the “Award Date”), a credit of stock units under the Plan (the “Award”), upon the terms and conditions set forth herein and in the Plan.

NOW THEREFORE, in consideration of services rendered and to be rendered by the Executive, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

1. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan.

2. Grant. Subject to the terms of this Agreement, the Corporation hereby grants to the Executive an Award with respect to an aggregate of 30,807.1473 stock units (subject to adjustment as provided in Section 7.1 of the Plan) (the “Stock Units”). As used herein, the term “stock unit” shall mean a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock (subject to adjustment as provided in Section 7.1 of the Plan) solely for purposes of the Plan and this Agreement. The Stock Units shall be used solely as a device for the determination of the

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payment to eventually be made to the Executive if such Stock Units vest pursuant to Section 3 or Section 9. The Stock Units shall not be treated as property or as a trust fund of any kind.

3. Vesting. Subject to Sections 8 and 9 below, the Award shall vest and become nonforfeitable with respect to the applicable number of the total Stock Units subject to the Award (with such number subject to adjustment under Section 7.1 of the Plan) upon each date set forth in the table below (with the first such date set forth below referred to herein as the “Initial Vesting Date”):

Date	Number of Units That Vest
July 23, 2012	15,403.57365
January 23, 2013	6,161.42946
January 23, 2014	6,161.42946
January 23, 2015	3,080.71473

4. Continuance of Employment. The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Agreement. Except as expressly provided in Section 8(b), employment or service for only a portion of any vesting period, even if a substantial portion, will not entitle the Executive to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 8 below or under the Plan for such vesting period (or for any later vesting period).

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation, affects the Executive’s status as an employee at will who is subject to termination without cause, confers upon the Executive any right to remain employed by or in service to the Corporation or any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time to terminate such employment or services, or affects the right of the Corporation or any Subsidiary to increase or decrease the Executive’s other compensation or benefits. Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Executive without his consent thereto.

5. Dividend and Voting Rights.

(a) Limitations on Rights Associated with Units. The Executive shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Sections 5(b) and 5(c) with respect to Dividend Equivalent Rights) and no voting rights, with respect to the Stock Units and any shares of Common Stock underlying or issuable in respect of such Stock Units until such shares of Common Stock are actually issued to and held of record by the Executive. No adjustments will be made for dividends or other rights of a holder for which the record date is prior to the date of issuance of the stock certificate.

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(b) Dividend Equivalent Rights. In the event that the Corporation pays an ordinary cash dividend on its Common Stock and the related dividend payment record date occurs at any time after the Award Date and before all of the Stock Units subject to the Award have either been paid pursuant to Section 7 or terminated pursuant to Sections 8 or 9, the Corporation shall credit the Executive as of the last day of the calendar quarter in which such record date occurs (the “Crediting Date”) with an additional number of Stock Units equal to (i) the per-share cash dividend paid by the Corporation on its Common Stock with respect to such record date, multiplied by (ii) the total number of outstanding and unpaid Stock Units (including any dividend equivalents previously credited hereunder) (with such total number adjusted pursuant to Section 7.1 of the Plan and/or Section 10 hereof) subject to the Award as of such record date, divided by (iii) the fair market value of a share of Common Stock (as determined under the Plan) on the Crediting Date. Any Stock Units credited pursuant to the foregoing provisions of this Section 5(b) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original Stock Units to which they relate. No crediting of Stock Units shall be made pursuant to this Section 5(b) with respect to any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Sections 8 or 9. Notwithstanding the above,  ⁶⁸/91 (the number of days remaining in the quarter after the Award Date divided by the total number of days in the quarter) of the dividend payable June 1, 2007, shall be payable in additional stock units on and applicable to the Stock Units and shall be credited on the Crediting Date of June 30, 2007.

(c) Special Crediting Date. Notwithstanding Section 5(b), if the vesting of the Award is accelerated in whole or in part pursuant to an Acceleration Event (as defined in Section 9) as provided in Section 9, and the Corporation pays an ordinary cash dividend on its Common Stock for which the related dividend payment record date occurs during the calendar quarter in which the Acceleration Event occurs and before the occurrence of such Acceleration Event, a Crediting Date shall be deemed to have occurred on the date of such Acceleration Event (a “Special Crediting Date”), and the Corporation shall credit the Executive as of such Special Crediting Date with an additional number of Stock Units equal to (i) the per-share cash dividend paid by the Corporation on its Common Stock with respect to each such record date, multiplied by (ii) the total number of outstanding and unpaid Stock Units (including any dividend equivalents previously credited hereunder) (with such total number adjusted pursuant to Section 7.1 of the Plan and/or Section 10 hereof) subject to the Award as of such record date, divided by (iii) the fair market value of a share of Common Stock on the Special Crediting Date. Any Stock Units credited pursuant to the foregoing provisions of this Section 5(c) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original Stock Units to which they relate. No crediting of Stock Units shall be made pursuant to this Section 5(c) with respect to any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Sections 8 or 9. For purposes of clarity, the Executive will not be entitled to a credit of additional Stock Units under both Section 5(b) and this Section 5(c) with respect to any one dividend payment record date.

6. Restrictions on Transfer. Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily. The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

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7. Timing and Manner of Payment of Stock Units. Except as provided below with respect to an Acceleration Event (as defined in Section 9), on or as soon as administratively practicable following the vesting of the applicable portion of the Stock Units being subject to the Award, and in no event later than the later of (i) the 15^th day of the third month following the end of the Executive’s taxable year in which any Stock Units subject to the Award became vested (regardless of whether such Stock Units became vested pursuant to Section 3, in connection with the Executive’s termination of employment or otherwise) or (ii) the 15^th day of the third month following the end of the Corporation’s taxable year in which such vesting occurs, the Corporation shall deliver to the Executive a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of such Stock Units that vested during such calendar quarter (including any vested Stock Units credited in respect of Dividend Equivalent Rights for such calendar quarter pursuant to Section 5(b) hereof); provided, however, (x) that the Executive may elect, on a form and in a manner prescribed by the Administrator, to defer any such payment of vested Stock Units, provided that such election must not take effect until at least twelve (12) months after it is made, must be made no less than twelve (12) months before such payment would otherwise be made, must defer such payment for a period of not less than five (5) years, and must otherwise comply with any applicable requirements of Section 409A of the Code and (y) that for any Stock Units becoming vested in connection with the Executive’s termination of employment for any reason, if such termination of employment is not a “separation from service” within the meaning of Section 409A of the Code, then such Stock Units shall not become payable until after the earliest of, as soon as practicable and in no event later than sixty (60) days following (A) the date the Stock Units would have been paid absent the accelerated vesting resulting from the Executive’s termination of employment, (B) the date of the Executive’s “separation from service” within the meaning of Section 409A of the Code, or (C) the date of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Corporation (each as determined in accordance with Section 409A of the Code). Notwithstanding the foregoing sentence, upon the occurrence of an Acceleration Event (as defined in Section 9 herein), the Stock Units that have vested as of the date of such Acceleration Event (after giving effect to any accelerated vesting in connection with such event pursuant to Section 9 and the crediting of any Dividend Equivalent Rights pursuant to Section 5(c) hereof) shall be paid promptly after, and in no event later than the later of (i) the 15^th day of the third month following the end of the Executive’s taxable year in which such Acceleration Event occurs or (ii) the 15^th day of the third month following the end of the Corporation’s taxable year in which such Acceleration Event occurs; provided, however, that for any Stock Units becoming vested in connection with an Acceleration Event, if the Acceleration Event is not a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Corporation (each as determined in accordance with Section 409A of the Code), then, to the extent necessary to avoid the imposition of any taxes under Section 409A of the Code, such Stock Units becoming vested shall not become payable in connection with the Acceleration Event and shall instead become payable after the earliest of, as soon as practicable and in no event later than sixty (60) days following (A) the date the Stock Units would have been paid absent the Acceleration Event, (B) the date of the Executive’s “separation from service” within the meaning of Section 409A of the Code, or (C) the date of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Corporation (each as

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determined in accordance with Section 409A of the Code). The Corporation’s obligation to deliver shares of Common Stock or otherwise make payment with respect to vested Stock Units is subject to the condition precedent that the Executive or other person entitled under the Plan to receive any shares with respect to the vested Stock Units deliver to the Corporation any representations or other documents or assurances required pursuant to Section 8.1 of the Plan. The Executive shall have no further rights with respect to any Stock Units that are paid pursuant to this Section 7 or that terminate pursuant to Sections 8 or 9.

8. Effect of Termination of Employment.

(a) General. Subject to Section 8(b), the Executive’s Stock Units shall terminate to the extent such units have not become vested prior to the first date the Executive is no longer employed by the Corporation or one of its Subsidiaries, regardless of the reason for the termination of the Executive’s employment with the Corporation or a Subsidiary, whether with or without cause, voluntarily or involuntarily. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Executive, or the Executive’s beneficiary or personal representative, as the case may be.

(b) Death or Disability. Notwithstanding Section 8(a) or any other provisions of this Agreement or the Plan, in the event that the Executive’s employment with the Corporation and its Subsidiaries terminates due to the Executive’s death or Disability (as defined below):

• at any time prior to the Initial Vesting Date, the Award shall vest and become nonforfeitable with respect to 1.5151% of the total number of Stock Units (subject to adjustment under Section 7.1 of the Plan) for each month of Executive’s employment with the Corporation (measured with reference to monthly anniversaries of the Award Date) after the Award Date and ending with the date of such termination of the Executive’s employment (rounded up to the nearest whole share); and

• at any time on or after the Initial Vesting Date, the Award shall become fully vested and nonforfeitable as of the date of such termination of the Executive’s employment.

For purposes of this Section 8(b), the term “Disability” shall mean the Executive’s inability to engage in any substantial gainful activity necessary to perform his duties hereunder by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than twelve (12) months. Any Stock Units subject to the Award that are not vested after giving effect to the foregoing provisions of this Section 8(b) shall terminate as of the date of termination of the Executive’s employment. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Executive, or the Executive’s beneficiary or personal representative, as the case may be.

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9. Effect of Change in Control Event. Notwithstanding anything to the contrary in Section 3 of this Agreement or Section 7.2 of the Plan, in the event of the dissolution of the Corporation or other event described in Section 7.1 of the Plan (which generally covers mergers or similar reorganizations) that the Corporation does not survive (or does not survive as a public company in respect of its Common Stock) or a Change in Control Event (an “Acceleration Event”), the Award shall be deemed vested as of the effective date of the Acceleration Event with respect to the applicable number of the total Stock Units subject to the Award (with such number subject to adjustment under Section 7.1 of the Plan) set forth in the table below based upon the year following the Award Date (measured with reference to anniversaries of the Award Date) in which such Acceleration Event occurs:

Year Following Award Date	Number of Units Deemed Vest
1st	9,242.14419
2nd	12,322.85892
3rd	15,403.57365
4th	18,484.28838
5th	21,565.00311
6th	24,645.71784
7th	27,726.43257
8th	30,807.14730

Any Stock Units subject to the Award that are not vested after giving effect to the foregoing provisions of this Section 9 shall terminate as of the effective date of the Acceleration Event, unless provision has been expressly made by the Administrator, through a plan of reorganization or otherwise, for the survival, substitution, assumption or exchange of the Award in connection with the Acceleration Event in a manner and to the extent that such survival, substitution, assumption or exchange would not result in any tax, interest or penalty under Section 409A of the Code. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Executive, or the Executive’s beneficiary or personal representative, as the case may be.

10. Adjustments Upon Specified Events. Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in accordance with such section in the number of Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Award. No such adjustment shall be made with respect to any ordinary cash dividend for which dividend equivalents are credited pursuant to Sections 5(b) or 5(c).

11. Tax Withholding. Subject to Section 8.1 of the Plan and such rules and procedures as the Administrator may impose, upon any distribution of shares of Common Stock in respect of the Stock Units, the Corporation shall automatically reduce the number of shares to be delivered

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by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value (with the “fair market value” of such shares determined in accordance with the applicable provisions of the Plan), to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates. In the event that the Corporation cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of the Stock Units, the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Executive and/or to deduct from other compensation payable to the Executive any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

12. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Executive at the Executive’s last address reflected on the Corporation’s records, or at such other address as either party may hereafter designate in writing to the other. Any such notice shall be given only when received, but if the Executive is no longer an employee of the Corporation, shall be deemed to have been duly given by the Corporation when enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government.

13. Plan. The Award and all rights of the Executive under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference. The Executive agrees to be bound by the terms of the Plan and this Agreement. The Executive acknowledges having read and understanding the Plan, the Prospectus for the Plan, and this Agreement. Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Executive unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

14. Construction; Section 409A. It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code. This Agreement shall be construed and interpreted consistent with that intent. Notwithstanding any provision to the contrary in this Agreement, to the extent necessary to avoid the imposition of taxes under Section 409A of the Code, no payment or distribution under this Agreement that becomes payable by reason of the Executive’s termination of employment with the Corporation will be made to the Executive unless the Executive’s termination of employment constitutes a “separation from service” (as such term is defined in Section 409A of the Code). For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Section 409A of the Code. If the Executive is a “specified employee” as defined in Section 409A of the Code and, as a result of that status, any portion of the payments under this Agreement would otherwise be subject to taxation pursuant to Section 409A of the Code, the Executive shall not be entitled to any payments upon a termination of his employment until the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executive’s “separation from service” (within the meaning of Section 409A of the Code) or (ii) the date of the Executive’s death. Upon the expiration of the

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applicable Section 409A deferral period, all payments and benefits deferred pursuant to this Section (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to the Executive in a lump sum as soon as practicable, but in no event later than ten (10) days following the expiration of the six-month period (or if the payment is being made following the Executive’s death, no later than sixty (60) days following the date of Executive’s death), and any remaining payments due under this Agreement will be paid in accordance with the normal payment dates specified for them herein.

15. Entire Agreement; Applicability of Other Agreements. This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing and signed by the Corporation. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Executive hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof. Notwithstanding the foregoing, if the Executive is subject to a written employment, change in control or similar agreement with the Corporation that is in effect as of the date of termination of the Executive’s employment with the Corporation and its Subsidiaries and the Executive would be entitled under the express provisions of such agreement to greater rights with respect to accelerated vesting of the Award in connection with the termination of the Executive’s employment in the circumstances, subject to Section 14 of this Agreement and to the extent permitted by Section 409A of the Code, the provisions of such agreement shall control with respect to such vesting rights, and the corresponding provisions of this Agreement shall not apply.

16. Limitation on Executive’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Executive shall have only the rights of a general unsecured creditor of the Corporation with respect to amounts credited and benefits payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to Stock Units, as and when payable hereunder.

17. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

18. Section Headings. The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

19. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Executive has hereunto set his hand as of the date and year first above written.

NATIONWIDE HEALTH PROPERTIES, INC.		EXECUTIVE
A Maryland corporation
		/s/ Abdo H. Khoury
By:	/s/ Douglas M. Pasquale	Signature
Print Name:	Douglas M. Pasquale	Abdo H. Khoury
		Print Name
Its:	President and Chief Executive Officer

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CONSENT OF SPOUSE

In consideration of the execution of the foregoing Stock Unit Award Agreement by Nationwide Health Properties, Inc., I,                                                          , the spouse of the Executive therein named, do hereby join with my spouse in executing the foregoing Stock Unit Award Agreement and do hereby agree to be bound by all of the terms and provisions thereof and of the Plan.

Dated:                     

Signature of Spouse

Print Name

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EX-10.20

Exhibit 10.20

AMENDED AND RESTATED

NATIONWIDE HEALTH PROPERTIES, INC.

2005 PERFORMANCE INCENTIVE PLAN

STOCK UNIT AWARD AGREEMENT

This amended and restated stock unit award agreement, effective as of December 31, 2008, hereby amends and restates that certain stock unit award agreement dated as of April 23, 2007 (the “Prior Agreement”), by and between Nationwide Health Properties, Inc., a Maryland corporation (the “Corporation”) and Donald D. Bradley (the “Executive”), with reference to the following:

WHEREAS, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), places certain restrictions, among other things, as to the timing and distributions from nonqualified deferred compensation plans and arrangements; and

WHEREAS, the Board of Directors of the Corporation desires to amend and restate the Prior Agreement to comply with Section 409A of the Code.

NOW THEREFORE, the Prior Agreement is hereby amended and restated in its entirety as follows:

THIS STOCK UNIT AWARD AGREEMENT (this “Agreement”) is dated as of April 23, 2007 by and between Nationwide Health Properties, Inc., a Maryland corporation (the “Corporation”), and Donald D. Bradley (the “Executive”).

W I T N E S S E T H

WHEREAS, pursuant to the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan (the “Plan”), the Corporation has granted to the Executive effective as of April 23, 2007 (the “Award Date”), a credit of stock units under the Plan (the “Award”), upon the terms and conditions set forth herein and in the Plan.

NOW THEREFORE, in consideration of services rendered and to be rendered by the Executive, and the mutual promises made herein and the mutual benefits to be derived therefrom, the parties agree as follows:

1. Defined Terms. Capitalized terms used herein and not otherwise defined herein shall have the meaning assigned to such terms in the Plan.

2. Grant. Subject to the terms of this Agreement, the Corporation hereby grants to the Executive an Award with respect to an aggregate of 30,807.1473 stock units (subject to adjustment as provided in Section 7.1 of the Plan) (the “Stock Units”). As used herein, the term “stock unit” shall mean a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding share of the Corporation’s Common Stock (subject to adjustment as provided in Section 7.1 of the Plan) solely for purposes of the Plan and this

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Agreement. The Stock Units shall be used solely as a device for the determination of the payment to eventually be made to the Executive if such Stock Units vest pursuant to Section 3 or Section 9. The Stock Units shall not be treated as property or as a trust fund of any kind.

3. Vesting. Subject to Sections 8 and 9 below, the Award shall vest and become nonforfeitable with respect to the applicable number of the total Stock Units subject to the Award (with such number subject to adjustment under Section 7.1 of the Plan) upon each date set forth in the table below (with the first such date set forth below referred to herein as the “Initial Vesting Date”):

Date	Number of Units That Vest
January 23, 2014	15,403.57365
January 23, 2015	2,200.51052
January 23, 2016	2,200.51052
January 23, 2017	2,200.51052
January 23, 2018	2,200.51052
January 23, 2019	2,200.51052
January 23, 2020	2,200.51052
January 23, 2021	2,200.51053

4. Continuance of Employment. The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting of the applicable installment of the Award and the rights and benefits under this Agreement. Except as expressly provided in Section 8(b), employment or service for only a portion of any vesting period, even if a substantial portion, will not entitle the Executive to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in Section 8 below or under the Plan for such vesting period (or for any later vesting period).

Nothing contained in this Agreement or the Plan constitutes an employment or service commitment by the Corporation, affects the Executive’s status as an employee at will who is subject to termination without cause, confers upon the Executive any right to remain employed by or in service to the Corporation or any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time to terminate such employment or services, or affects the right of the Corporation or any Subsidiary to increase or decrease the Executive’s other compensation or benefits. Nothing in this paragraph, however, is intended to adversely affect any independent contractual right of the Executive without his consent thereto.

5. Dividend and Voting Rights.

(a) Limitations on Rights Associated with Units. The Executive shall have no rights as a stockholder of the Corporation, no dividend rights (except as expressly provided in Sections 5(b) and 5(c) with respect to Dividend Equivalent Rights) and no voting rights, with respect to the Stock Units and any shares of Common Stock underlying or issuable in respect of

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such Stock Units until such shares of Common Stock are actually issued to and held of record by the Executive. No adjustments will be made for dividends or other rights of a holder for which the record date is prior to the date of issuance of the stock certificate.

(b) Dividend Equivalent Rights. In the event that the Corporation pays an ordinary cash dividend on its Common Stock and the related dividend payment record date occurs at any time after the Award Date and before all of the Stock Units subject to the Award have either been paid pursuant to Section 7 or terminated pursuant to Sections 8 or 9, the Corporation shall credit the Executive as of the last day of the calendar quarter in which such record date occurs (the “Crediting Date”) with an additional number of Stock Units equal to (i) the per-share cash dividend paid by the Corporation on its Common Stock with respect to such record date, multiplied by (ii) the total number of outstanding and unpaid Stock Units (including any dividend equivalents previously credited hereunder) (with such total number adjusted pursuant to Section 7.1 of the Plan and/or Section 10 hereof) subject to the Award as of such record date, divided by (iii) the fair market value of a share of Common Stock (as determined under the Plan) on the Crediting Date. Any Stock Units credited pursuant to the foregoing provisions of this Section 5(b) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original Stock Units to which they relate. No crediting of Stock Units shall be made pursuant to this Section 5(b) with respect to any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Sections 8 or 9. Notwithstanding the above,  ⁶⁸/91 (the number of days remaining in the quarter after the Award Date divided by the total number of days in the quarter) of the dividend payable June 1, 2007, shall be payable in additional stock units on and applicable to the Stock Units and shall be credited on the Crediting Date of June 30, 2007.

(c) Special Crediting Date. Notwithstanding Section 5(b), if the vesting of the Award is accelerated in whole or in part pursuant to an Acceleration Event (as defined in Section 9) as provided in Section 9, and the Corporation pays an ordinary cash dividend on its Common Stock for which the related dividend payment record date occurs during the calendar quarter in which the Acceleration Event occurs and before the occurrence of such Acceleration Event, a Crediting Date shall be deemed to have occurred on the date of such Acceleration Event (a “Special Crediting Date”), and the Corporation shall credit the Executive as of such Special Crediting Date with an additional number of Stock Units equal to (i) the per-share cash dividend paid by the Corporation on its Common Stock with respect to each such record date, multiplied by (ii) the total number of outstanding and unpaid Stock Units (including any dividend equivalents previously credited hereunder) (with such total number adjusted pursuant to Section 7.1 of the Plan and/or Section 10 hereof) subject to the Award as of such record date, divided by (iii) the fair market value of a share of Common Stock on the Special Crediting Date. Any Stock Units credited pursuant to the foregoing provisions of this Section 5(c) shall be subject to the same vesting, payment and other terms, conditions and restrictions as the original Stock Units to which they relate. No crediting of Stock Units shall be made pursuant to this Section 5(c) with respect to any Stock Units which, as of such record date, have either been paid pursuant to Section 7 or terminated pursuant to Sections 8 or 9. For purposes of clarity, the Executive will not be entitled to a credit of additional Stock Units under both Section 5(b) and this Section 5(c) with respect to any one dividend payment record date.

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6. Restrictions on Transfer. Neither the Award, nor any interest therein or amount or shares payable in respect thereof may be sold, assigned, transferred, pledged or otherwise disposed of, alienated or encumbered, either voluntarily or involuntarily. The transfer restrictions in the preceding sentence shall not apply to (a) transfers to the Corporation, or (b) transfers by will or the laws of descent and distribution.

7. Timing and Manner of Payment of Stock Units. Except as provided below with respect to an Acceleration Event (as defined in Section 9), on or as soon as administratively practicable following the vesting of the applicable portion of the Stock Units being subject to the Award, and in no event later than the later of (i) the 15^th day of the third month following the end of the Executive’s taxable year in which any Stock Units subject to the Award became vested (regardless of whether such Stock Units became vested pursuant to Section 3, in connection with the Executive’s termination of employment pursuant to the Change in Control Agreement (as defined below) or any written employment or successor change in control agreement or in connection with the Executive’s termination of employment due to death or Disability pursuant to Section 8(b) below), or (ii) the 15^th day of the third month following the end of the Corporation’s taxable year in which such vesting occurs, the Corporation shall deliver to the Executive a number of shares of Common Stock (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Corporation in its discretion) equal to the number of such Stock Units that vested during such calendar quarter (including any vested Stock Units credited in respect of Dividend Equivalent Rights for such calendar quarter pursuant to Section 5(b) hereof); provided, however, (x) that the Executive may elect, on a form and in a manner prescribed by the Administrator, to defer any such payment of vested Stock Units, provided that such election must not take effect until at least twelve (12) months after it is made, must be made no less than twelve (12) months before such payment would otherwise be made, must defer such payment for a period of not less than five (5) years, and must otherwise comply with any applicable requirements of Section 409A of the Code and (y) that for any Stock Units becoming vested in connection with the Executive’s termination of employment for any reason, if such termination of employment is not a “separation from service” within the meaning of Section 409A of the Code, then such Stock Units shall not become payable until after the earliest of, as soon as practicable and in no event later than sixty (60) days following (A) the date the Stock Units would have been paid absent the accelerated vesting resulting from the Executive’s termination of employment, (B) the date of the Executive’s “separation from service” within the meaning of Section 409A of the Code, or (C) the date of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Corporation (each as determined in accordance with Section 409A of the Code). Notwithstanding the foregoing sentence, upon the occurrence of an Acceleration Event (as defined in Section 9 herein), the Stock Units that have vested as of the date of such Acceleration Event (after giving effect to any accelerated vesting in connection with such event pursuant to Section 9 and the crediting of any Dividend Equivalent Rights pursuant to Section 5(c) hereof) shall be paid promptly after, and in no event later than the later of (i) the 15^th day of the third month following the end of the Executive’s taxable year in which such Acceleration Event occurs or (ii) the 15^th day of the third month following the end of the Corporation’s taxable year in which such Acceleration Event occurs; provided, however, that for any Stock Units becoming vested in connection with an Acceleration Event, if the Acceleration Event is not a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Corporation (each as

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determined in accordance with Section 409A of the Code), then, to the extent necessary to avoid the imposition of any taxes under Section 409A of the Code, such Stock Units becoming vested shall not become payable in connection with the Acceleration Event and shall instead become payable after the earliest of, as soon as practicable and in no event later than sixty (60) days following (A) the date the Stock Units would have been paid absent the Acceleration Event, (B) the date of the Executive’s “separation from service” within the meaning of Section 409A of the Code, or (C) the date of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Corporation (each as determined in accordance with Section 409A of the Code). The Corporation’s obligation to deliver shares of Common Stock or otherwise make payment with respect to vested Stock Units is subject to the condition precedent that the Executive or other person entitled under the Plan to receive any shares with respect to the vested Stock Units deliver to the Corporation any representations or other documents or assurances required pursuant to Section 8.1 of the Plan. The Executive shall have no further rights with respect to any Stock Units that are paid pursuant to this Section 7 or that terminate pursuant to Sections 8 or 9.

8. Effect of Termination of Employment.

(a) General. Subject to Section 8(b), the Executive’s Stock Units shall terminate to the extent such units have not become vested prior to the first date the Executive is no longer employed by the Corporation or one of its Subsidiaries, regardless of the reason for the termination of the Executive’s employment with the Corporation or a Subsidiary, whether with or without cause, voluntarily or involuntarily. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Executive, or the Executive’s beneficiary or personal representative, as the case may be.

(b) Death or Disability. Notwithstanding Section 8(a) or any other provisions of this Agreement or the Plan, in the event that the Executive’s employment with the Corporation and its Subsidiaries terminates due to the Executive’s death or Disability (as defined below):

• at any time prior to the Initial Vesting Date, the Award shall vest and become nonforfeitable with respect to 1.1905% of the total number of Stock Units (subject to adjustment under Section 7.1 of the Plan) for each month of Executive’s employment with the Corporation (measured with reference to monthly anniversaries of the Award Date) after the Award Date and ending with the date of such termination of the Executive’s employment (rounded up to the nearest whole share); and

• at any time on or after the Initial Vesting Date, the Award shall become fully vested and nonforfeitable as of the date of such termination of the Executive’s employment.

For purposes of this Section 8(b), the term “Disability” shall mean the Executive’s inability to engage in any substantial gainful activity necessary to perform his duties hereunder by reason of any medically determinable physical or mental impairment which can be

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expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than twelve (12) months. Any Stock Units subject to the Award that are not vested after giving effect to the foregoing provisions of this Section 8(b) shall terminate as of the date of termination of the Executive’s employment. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Executive, or the Executive’s beneficiary or personal representative, as the case may be.

9. Effect of Change in Control Event. Notwithstanding anything to the contrary in Section 3 of this Agreement or Section 7.2 of the Plan, in the event of the dissolution of the Corporation or other event described in Section 7.1 of the Plan (which generally covers mergers or similar reorganizations) that the Corporation does not survive (or does not survive as a public company in respect of its Common Stock) or a Change in Control Event (an “Acceleration Event”), the Award shall be deemed vested as of the effective date of the Acceleration Event with respect to the applicable number of the total Stock Units subject to the Award (with such number subject to adjustment under Section 7.1 of the Plan) set forth in the table below based upon the year following the Award Date (measured with reference to anniversaries of the Award Date) in which such Acceleration Event occurs:

Year Following Award Date	Number of Units Deemed Vest
1st	9,242.14419
2nd	10,905.73014
3rd	12,569.31610
4th	14,232.90205
5th	15,896.48800
6th	17,560.07396
7th	19,223.65992
8th	20,887.24587
9th	22,550.83182
10th	24,214.41778
11th	25,878.00373
12th	27,541.58969
13th	29,205.17564
14th	30,807.14730

Any Stock Units subject to the Award that are not vested after giving effect to the foregoing provisions of this Section 9 shall terminate as of the effective date of the Acceleration Event, unless provision has been expressly made by the Administrator, through a plan of reorganization or otherwise, for the survival, substitution, assumption or exchange of the Award in connection with the Acceleration Event in a manner and to the extent that such survival, substitution, assumption or exchange would not result in any tax, interest or penalty under

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Section 409A of the Code. If any unvested Stock Units are terminated hereunder, such Stock Units shall automatically terminate and be cancelled as of the applicable termination date without payment of any consideration by the Corporation and without any other action by the Executive, or the Executive’s beneficiary or personal representative, as the case may be.

10. Adjustments Upon Specified Events. Upon the occurrence of certain events relating to the Corporation’s stock contemplated by Section 7.1 of the Plan (including, without limitation, an extraordinary cash dividend on such stock), the Administrator shall make adjustments in accordance with such section in the number of Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Award. No such adjustment shall be made with respect to any ordinary cash dividend for which dividend equivalents are credited pursuant to Sections 5(b) or 5(c).

11. Tax Withholding. Subject to Section 8.1 of the Plan and such rules and procedures as the Administrator may impose, upon any distribution of shares of Common Stock in respect of the Stock Units, the Corporation shall automatically reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of whole shares, valued at their then fair market value (with the “fair market value” of such shares determined in accordance with the applicable provisions of the Plan), to satisfy any withholding obligations of the Corporation or its Subsidiaries with respect to such distribution of shares at the minimum applicable withholding rates. In the event that the Corporation cannot legally satisfy such withholding obligations by such reduction of shares, or in the event of a cash payment or any other withholding event in respect of the Stock Units, the Corporation (or a Subsidiary) shall be entitled to require a cash payment by or on behalf of the Executive and/or to deduct from other compensation payable to the Executive any sums required by federal, state or local tax law to be withheld with respect to such distribution or payment.

12. Notices. Any notice to be given under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Executive at the Executive’s last address reflected on the Corporation’s records, or at such other address as either party may hereafter designate in writing to the other. Any such notice shall be given only when received, but if the Executive is no longer an employee of the Corporation, shall be deemed to have been duly given by the Corporation when enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government.

13. Plan. The Award and all rights of the Executive under this Agreement are subject to the terms and conditions of the provisions of the Plan, incorporated herein by reference. The Executive agrees to be bound by the terms of the Plan and this Agreement. The Executive acknowledges having read and understanding the Plan, the Prospectus for the Plan, and this Agreement. Unless otherwise expressly provided in other sections of this Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not (and shall not be deemed to) create any rights in the Executive unless such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator under the Plan after the date hereof.

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14. Construction; Section 409A. It is intended that the terms of the Award will not result in the imposition of any tax liability pursuant to Section 409A of the Code. This Agreement shall be construed and interpreted consistent with that intent. Notwithstanding any provision to the contrary in this Agreement, to the extent necessary to avoid the imposition of taxes under Section 409A of the Code, no payment or distribution under this Agreement that becomes payable by reason of the Executive’s termination of employment with the Corporation will be made to the Executive unless the Executive’s termination of employment constitutes a “separation from service” (as such term is defined in Section 409A of the Code). For purposes of this Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Section 409A of the Code. If the Executive is a “specified employee” as defined in Section 409A of the Code and, as a result of that status, any portion of the payments under this Agreement would otherwise be subject to taxation pursuant to Section 409A of the Code, the Executive shall not be entitled to any payments upon a termination of his employment until the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executive’s “separation from service” (within the meaning of Section 409A of the Code) or (ii) the date of the Executive’s death. Upon the expiration of the applicable Section 409A deferral period, all payments and benefits deferred pursuant to this Section (whether they would have otherwise been payable in a single sum or in installments in the absence of such deferral) shall be paid or reimbursed to the Executive in a lump sum as soon as practicable, but in no event later than ten (10) days following the expiration of the six-month period (or if the payment is being made following Executive’s death, no later than sixty (60) days following the date of Executive’s death), and any remaining payments due under this Agreement will be paid in accordance with the normal payment dates specified for them herein.

15. Entire Agreement; Applicability of Other Agreements. This Agreement and the Plan together constitute the entire agreement and supersede all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing and signed by the Corporation. The Corporation may, however, unilaterally waive any provision hereof in writing to the extent such waiver does not adversely affect the interests of the Executive hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof. Notwithstanding the foregoing, if the Executive is subject to a written employment, change in control or similar agreement with the Corporation that is in effect as of the date of termination of the Executive’s employment with the Corporation and its Subsidiaries and the Executive would be entitled under the express provisions of such agreement to greater rights with respect to accelerated vesting of the Award in connection with the termination of the Executive’s employment in the circumstances, subject to Section 14 of this Agreement and to the extent permitted by Section 409A of the Code, the provisions of such agreement shall control with respect to such vesting rights, and the corresponding provisions of this Agreement shall not apply.

16. Limitation on Executive’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Corporation as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Executive shall have only the rights of a general unsecured creditor of the Corporation with respect to

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amounts credited and benefits payable, if any, with respect to the Stock Units, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to Stock Units, as and when payable hereunder.

17. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

18. Section Headings. The section headings of this Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision hereof.

19. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland without regard to conflict of law principles thereunder.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed on its behalf by a duly authorized officer and the Executive has hereunto set his hand as of the date and year first above written.

NATIONWIDE HEALTH PROPERTIES, INC.		EXECUTIVE
A Maryland corporation
		/s/ Donald D. Bradley
By:	/s/ Douglas M. Pasquale	Signature
Print Name:	Douglas M. Pasquale	Donald D. Bradley
		Print Name
Its:	President and Chief Executive Officer

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CONSENT OF SPOUSE

In consideration of the execution of the foregoing Stock Unit Award Agreement by Nationwide Health Properties, Inc., I,                                                          , the spouse of the Executive therein named, do hereby join with my spouse in executing the foregoing Stock Unit Award Agreement and do hereby agree to be bound by all of the terms and provisions thereof and of the Plan.

Dated:                     

Signature of Spouse

Print Name

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EX-10.28

Exhibit 10.28

GUARANTY OF OBLIGATIONS

THIS GUARANTY OF OBLIGATIONS (this “Guaranty”) is executed as of September 18, 2008 by JEFFREY L. RUSH, an individual, MARK D. TOOTHACRE, an individual, ELIZABETH A. POWELL, an individual, KIMBERLY B. COCHRANE, an individual, and ROBERT A. ROSENTHAL, an individual (collectively, “Guarantor”), in favor of NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation (“Lender”).

RECITALS

A. Lender has agreed to make a loan in the principal amount of $47,500,000 (the “Loan”) to PDP Pomerado LLC, a California limited liability company ( “Borrower”), pursuant to the terms and conditions of that certain Secured Promissory Note of even date herewith to be executed by Borrower in favor of Lender (the “Note”). The obligations due from Borrower to Lender under the Note are secured by that certain Leasehold Deed of Trust, Assignment of Rents, Security Agreement, Financing Statement and Fixture Filing (the “Deed of Trust”), which creates a lien, inter alia, on Borrower’s leasehold interest in certain real property located in the City of Poway, County of San Diego, State of California, as more particularly described in the Deed of Trust. All initially-capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Deed of Trust. The Note and Deed of Trust (together with any and all amendments, modifications, restatements or extensions thereof), and all other documents, agreements or instruments executed by Borrower in favor of Lender in connection with the Loan, shall be hereinafter collectively referred to as the “Loan Documents.”

B. Guarantor acknowledges and agrees that Lender would not have been willing to make the Loan to Borrower unless Guarantor was willing to execute and deliver this Guaranty.

AGREEMENTS

NOW, THEREFORE, in consideration of Lender making the Loan to Borrower, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor agrees as follows:

1. Guaranty.

Guarantor hereby absolutely and unconditionally guarantees to Lender the following (collectively, the “Guaranteed Obligations”):

(a) the full, complete and timely payment when due, by acceleration or otherwise, of all obligations of Borrower now or hereafter existing under the Note and other Loan Documents, whether for principal, interest, fees, expenses or otherwise;

(b) the full, complete and timely performance by Borrower of all covenants, indemnities and other obligations under the Deed of Trust and the other Loan Documents, including, without limitation, any indemnity or other obligations of Borrower which survives the expiration or earlier termination of the Loan Documents; and

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(c) all costs of collection or enforcement incurred by Lender in exercising any remedies provided for in the Note or the other Loan Documents at law or in equity with respect to the matters set forth in clauses (a) and (b), inclusive, above.

2. Guaranty Cap.

Except as otherwise expressly set forth herein, the aggregate liability of Guarantor under this Guaranty shall not exceed the sum of $7,136,250, plus interest on the full principal amount outstanding and payable under the Note and costs and expenses incurred in enforcing or collecting under this Guaranty. The foregoing monetary cap shall not apply to any liability of Guarantor arising under this Guaranty by reason of any of the following:

(a) The misapplication of Insurance Proceeds under the terms of the Deed of Trust;

(b) The misapplication of Condemnation Proceeds under the terms of the Deed of Trust;

(c) The misapplication of Rents under the terms of the Deed of Trust;

(d) Waste committed on the Trust Estate or damage to the Trust Estate as a result of the intentional misconduct or negligence of Borrower or Guarantor, or any removal or disposal of any of the Trust Estate in violation of the terms of the Deed of Trust;

(e) Any mechanic’s liens, materialmen’s liens or other liens not paid to the appropriate payee which could create liens on any portion of the Trust Estate;

(f) The breach by Borrower or Guarantor of any of its respective obligations and indemnities under the Loan Documents relating to hazardous or toxic substances or compliance with environmental laws and regulations, it being understood that nothing herein shall be deemed to limit, impair or reduce said obligations and indemnities;

(g) Fraud or material misrepresentation by Borrower or Guarantor or, if Guarantor knew or would have known thereof by exercising reasonable supervision of such persons, by any principals, officers or employees of Borrower or by any guarantor, any indemnitor or any agent, employee or other person authorized or apparently authorized to make statements or representations on behalf of Borrower;

(h) The failure of Borrower to maintain the types and levels of insurance required under the terms of the Deed of Trust; and

(i) The assertion by Borrower or Guarantor of any cause of action against Lender relating to the Loan, that Lender has any liability whatsoever to Borrower or Guarantor, or that Lender is a partner or joint venturer of Borrower or has any liability as such.

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3. Performance by Guarantor.

Upon the occurrence of an Event of Default (as defined in the Note) and the expiration of any applicable notice and/or cure period thereunder, then upon demand by Lender, Guarantor shall pay within ten (10) days such sums and perform such obligations as required by the Loan Documents, without regard to:

(a) any defense, set-off, or counterclaim which Guarantor or Borrower may have or assert;

(b) whether or not Lender shall have instituted any suit, action or proceeding or exhausted its remedies or taken any steps to enforce any rights against Borrower or any other person to collect all or any part of such sums, either pursuant to the provisions of the Loan Documents or at law or in equity (it being understood that this is a guaranty of payment and not collection, and Guarantor’s liability for such payment shall be primary); or

(c) any other condition or contingency.

Guarantor waives any right of exoneration and any right to require Lender to make an election of remedies. Guarantor covenants and agrees that it shall not cause any default under the Loan Documents. Guarantor’s performance or satisfaction of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge Guarantor’s liability for that portion of the Guaranteed Obligations which is not performed and Lender shall have the right to designate the manner in which any payments made by Borrower under the Loan Documents or by Guarantor pursuant to this Guaranty are applied to the Guaranteed Obligations. Without limiting the generality of the foregoing, in the event that Lender receives payment for, or is awarded a judgment in any suit brought to enforce Guarantor’s covenant to perform a portion of the Guaranteed Obligations, such payment or judgment shall in no way be deemed to release Guarantor from its covenant to perform or satisfy any portion of the Guaranteed Obligations which is not satisfied by such payment or the collection of any such judgment. Lender shall be under no obligation whatsoever to exhaust any of its collateral for the Guaranteed Obligations or to pursue any right or remedy it may have under the Loan Documents, at law, in equity or otherwise, or to take any action whatsoever to mitigate or reduce Guarantor’s liability hereunder, notwithstanding the fact that the Loan may be fully matured, the outstanding principal balance thereof may be fully due and payable and Borrower is in default of its obligations under the Loan Documents.

4. Guarantor’s Representations and Warranties.

Each Guarantor hereby represents and warrants unto Lender that:

(a) this Guaranty constitutes a legal, valid, and binding obligation of Guarantor and is fully enforceable against Guarantor in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application and of legal or equitable principles generally and covenants of good faith and fair dealing; and

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(b) this Guaranty is duly authorized, executed and delivered by and binding upon Guarantor.

Any material breach by any Guarantor of the representations and warranties set forth herein shall be a default under this Guaranty.

5. Waiver.

Guarantor hereby knowingly, voluntarily and unequivocally waives:

(a) all notice of acceptance hereof, protest, demand and dishonor, presentment and demands of any kind now or hereafter provided for by any statute or rule of law;

(b) any and all requirements that Lender institute any action or proceeding, or exhaust any or all of Lender’s rights, remedies or recourse, against Borrower or anyone else as a condition precedent to bringing an action against Guarantor under this Guaranty, it being expressly agreed that the liability of Guarantor hereunder shall be primary and not secondary;

(c) any defense arising by reason of any disability, insolvency, bankruptcy, lack of authority or power, death, insanity, minority, dissolution or any other defense of Borrower, its successors and assigns, Guarantor or, if applicable, any other guarantor of the Guaranteed Obligations (even though rendering the same void, unenforceable or otherwise uncollectible), it being agreed that Guarantor shall remain liable hereon regardless of whether Borrower or any other such person be found not liable thereon for any reason;

(d) the benefits of any and all statutes, laws, rules or regulations applicable in the State of California which may require the prior or concurrent joinder of any other party to any action on this Guaranty or which may require the exhaustion of remedies prior to a suit on this Guaranty, all as amended from time to time;

(e) any failure, omission, delay or lack on the part of Lender or Borrower to enforce, assert or exercise any right, power or remedy conferred on Lender or Borrower in the Loan Documents or this Guaranty or any action on the part of Lender granting a waiver, indulgence or extension to Borrower or Guarantor;

(f) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets of Borrower, marshaling of assets or liabilities, receiverships, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar proceeding affecting Borrower or any of its assets, or the disaffirmance of any of the Loan Documents in any such proceeding; and

(g) any release or other reduction of the Guaranteed Obligations arising as a result of the expansion, release, substitution or replacement (whether or not in accordance with terms of any of the Loan Documents) of the Loan Documents.

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6. Additional Waivers.

Without limitation of any other provision of this Guaranty (including the waivers, acknowledgments and agreements set forth in Sections 5 and 7 hereof), Guarantor further waives: (i) any defense to the recovery by Lender against Guarantor of any deficiency or otherwise to the enforcement of this Guaranty or any security for this Guaranty based upon Lender’s election of any remedy against Guarantor or Borrower, including the defense to enforcement of this Guaranty (the so-called “Gradsky” defense) which, absent this waiver, Guarantor would have by virtue of an election by Lender to conduct a non-judicial foreclosure sale (also known as a “trustee’s sale”) of any real property security for the Loan, it being understood by Guarantor that any such non-judicial foreclosure sale will destroy, by operation of California Code of Civil Procedure (“CCP”) Section 580d, all rights of any party to a deficiency judgment against Borrower and, as a consequence, will destroy all rights that Guarantor would otherwise have (including the right of subrogation, the right of reimbursement, and the right of contribution) to proceed against Borrower; (ii) any defense or benefits that may be derived from CCP Sections 580a, 580b, 580d or 726, or comparable provisions of the laws of any other jurisdiction and all other anti-deficiency and one form of action defenses under the laws of California and any other jurisdiction; and (iii) any right to a fair value hearing under CCP Section 580a, or any other similar law, to determine the size of any deficiency owing (for which Guarantor would be liable hereunder) following a non-judicial foreclosure sale.

(a) Without limitation of this Section 6 or any other provision of this Guaranty, Guarantor waives all rights and defenses that Guarantor may have because the Loan is secured by real property. This means, among other things:

(i) That Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower; and

(ii) If Lender forecloses on any real property collateral pledged by Borrower: (A) the amount of the Loan may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (B) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower.

This is an unconditional and irrevocable waiver of any rights and defenses that Guarantor may have because the Loan is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon CCP Sections 580a, 580b, 580d, or 726.

(b) Guarantor waives all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for the Loan, has destroyed Guarantor’s rights of subrogation and reimbursement against Borrower by operation of CCP Section 580d or otherwise.

(c) Until the Guaranteed Obligations have been paid or discharged in full, Guarantor waives Guarantor’s rights of subrogation and reimbursement, including (i) any defenses Guarantor may have by reason of an election of remedies by Lender, and (ii) any rights or defenses Guarantor may have by reason of protection afforded to Borrower with

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respect to the Loan, pursuant to the anti-deficiency or other laws of California limiting or discharging Borrower’s obligations, including CCP Sections 580a, 580b, 580d or 726.

(d) Until the Guaranteed Obligations have been paid or discharged in full, Guarantor waives notice of acceptance of this Guaranty, any rights, defenses and benefits that may be derived from Sections 2787 to 2855, inclusive, of the California Civil Code or comparable provisions of the laws of any other jurisdiction, and all other suretyship defenses Guarantor would otherwise have under the laws of California or any other jurisdiction.

(e) No provision or waiver in this Guaranty shall be construed as limiting the generality of any other provision or waiver contained in this Guaranty. All of the waivers contained herein are irrevocable and unconditional and are intentionally and freely made by Guarantor.

7. Subsequent Acts.

Without notice to, consideration to, or the consent of, any Guarantor:

(a) the Loan Documents, and Borrower’s rights and obligations thereunder, may be modified, amended, renewed, extended or increased;

(b) any additional parties who are or may become liable for the Guaranteed Obligations may hereafter be released from their liability hereunder and thereon; and/or

(c) Lender may take, or delay in taking or refuse to take, any and all action with reference to the Loan Documents (regardless of whether the same might vary the risk or alter the rights, remedies or recourse of Guarantor), including specifically the settlement or compromise of any amount allegedly due thereunder.

No such acts shall in any way release, diminish, or affect the absolute nature of Guarantor’s obligations and liabilities hereunder. Guarantor’s obligations and liabilities under this Guaranty are primary, absolute and unconditional, under any and all circumstances and until the Guaranteed Obligations are fully and finally satisfied, such obligations and liabilities shall not be discharged or released, in whole or in part, by any act or occurrence which might, but for this Section 7, be deemed a legal or equitable discharge or release of Guarantor.

8. Successors and Assigns.

This Guaranty may be enforced as to any one or more breaches either separately or cumulatively, shall inure to the benefit of Lender (and its successors and assigns) and shall be binding upon Guarantor (and its successors and assigns). All references herein to “Lender” shall mean the above-named Lender and any subsequent owner of Lender’s interest in the Note. No transfer by Guarantor of its obligations hereunder shall operate to release Guarantor from such obligations.

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9. Remedies Cumulative.

All rights, remedies and recourse afforded to Lender by reason of this Guaranty, or otherwise, are separate and cumulative and may be pursued separately, successively or concurrently, as occasion therefor shall arise and are non-exclusive and shall in no way limit or prejudice any other legal or equitable right, remedy or recourse which Lender may have.

10. Subordination; No Subrogation.

(a) If for any reason whatsoever Borrower now or hereafter becomes indebted to Guarantor or any Affiliate of Guarantor, such unpaid indebtedness and all interest thereon shall at all times be subordinate in all respects to the Guaranteed Obligations. During any time in which an Event of Default has occurred and is continuing under the Loan Documents, Guarantor agrees to make no claim for such indebtedness that does not recite that such claim is expressly subordinate to Lender’s rights and remedies under the Loan Documents.

(b) Notwithstanding anything to the contrary contained in this Guaranty or any payments made by Guarantor, no Guarantor shall have any right of subrogation in or under the Loan Documents or to participate in the rights and benefits accruing to Lender thereunder, all such rights of subrogation and participation, together with all of the contractual, statutory, or common law rights which Guarantor may have to be reimbursed for any payments Guarantor may make to, or performance by Guarantor of any of the Guaranteed Obligations for the benefit of, Lender pursuant to this Guaranty, being hereby expressly waived and released; provided, however, that Guarantor’s waiver of any of its rights of reimbursement, indemnification and contribution against Borrower, including without limitation under California Civil Code Sections 2846 through 2849, shall continue only until the Guaranteed Obligations have been paid or discharged in full.

11. Governing Law.

This Guaranty and all rights and duties of Guarantor and Lender arising from this Guaranty shall be governed by, construed and enforced in accordance with the internal laws of the State of California.

12. Severability.

If any provision of this Guaranty or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, neither the remainder of this Guaranty nor the application of such provision to any other persons or circumstances shall be affected thereby, but rather the same shall be enforced to the greatest extent permitted by law.

13. Attorneys’ Fees.

In the event any legal action or proceeding is commenced to interpret or enforce the terms of, or obligations arising out of, this Guaranty, or to recover damages for the breach thereof, the party prevailing in any such action or proceedings shall be entitled to recover from the non-

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prevailing party all reasonable attorneys’ fees and reasonable costs and expenses incurred by the prevailing party.

14. Confirmation.

At any time, and at the request of Lender, Guarantor shall execute and deliver to Lender a certificate ratifying and confirming all of Guarantor’s obligations and liabilities under this Guaranty.

15. Benefit to Guarantor.

Guarantor acknowledges that it will benefit from the making of the Loan and the execution and continued existence of the Loan Documents, and Guarantor further acknowledges that Lender will be relying upon Guarantor’s guarantee, representations, warranties and covenants contained herein.

16. Notices.

All notices, demand or documents which are required or permitted to be given or served hereunder shall be in writing and shall be deemed served: (i) three (3) days after deposited in the United States Mail, postage prepaid, certified mail, return receipt requested; (ii) upon receipt by commercial express courier; and (iii) upon receipt by confirmed receipted facsimile if properly sent and confirmed to the receiving parties’ facsimile number listed below, when addressed or faxed as follows:

If to Guarantor:	If to Lender:
c/o Pacific Medical Buildings LLC	Nationwide Health Properties, Inc.
12348 High Bluff Drive, Suite 100	610 Newport Center Drive, Suite 1150
San Diego, California 92130	Newport Beach, California 92660
Attn: Evan Stone, Esq.	Attn: President and CFO
Fax No.: (858) 794-1910	Fax No.: (949) 759-6876

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With a copy to:		With a copy to:
Palomar Pomerado Health		Sherry Meyerhoff Hanson & Crance LLP
15255 Innovation Drive		610 Newport Center Drive, Suite 1200
San Diego, California 92128		Newport Beach, California 92660
Attn:	CFO	Attn: Kevin L. Sherry, Esq.
Fax No.:		Fax No.: (949) 719-1212
Palomar Pomerado Health
15255 Innovation Drive
San Diego, California 92128
Attn:	Director of Facilities Planning and
	Development
Fax No.:
Evan Stone, Esq.
PMB LLC
12348 High Bluff Drive, Suite 100
San Diego, California 92130
Fax No.: (858) 350-1953

Each of such parties shall have the right to designate from time to time another address or facsimile number for purposes of this Guaranty by written notice to the other parties sent in the manner set forth in this Section 16.

17. Incorporation of Recitals.

The Recitals set forth above are hereby incorporated by this reference and made a part of this Guaranty. Guarantor hereby represents and warrants that the Recitals are true and correct.

18. Joint and Several Liability.

Each Guarantor shall be jointly and severally liable to Lender for the faithful performance of this Guaranty.

19. Counterparts.

This Guaranty may be executed in any number of counterparts, each of which shall be considered an original but all of which, when taken together, shall constitute one and the same instrument.

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EXECUTED as of the date first set forth above.

“GUARANTOR”:

JEFFREY L. RUSH,

an individual,

/s/ Jeffrey L. Rush

MARK D. TOOTHACRE,

an individual,

/s/ Mark D. Toothacre

ELIZABETH A. POWELL,

an individual,

/s/ Elizabeth A. Powell

KIMBERLY B. COCHRANE,

an individual,

/s/ Kimberly B. Cochrane

ROBERT A. ROSENTHAL,

an individual

/s/ Robert A. Rosenthal

S-1

EX-10.29(B)

Exhibit 10.29(b)

FIRST AMENDMENT TO THE

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP

OF

NHP/PMB L.P.

This FIRST AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NHP/PMB L.P., dated as of May 12, 2008 (this “Amendment”), is being executed by NHP/PMB GP LLC, a Delaware limited liability company (the “General Partner”), as the general partner of NHP/PMB L.P., a Delaware limited partnership (the “Partnership”). Capitalized terms used, but not otherwise defined herein, shall have the respective meanings ascribed thereto in the Partnership Agreement (as defined below).

WHEREAS, the General Partner, the Limited Partners and Nationwide Health Properties, Inc., a Maryland corporation (for the sole purpose of agreeing to the provisions of Article XVI thereof) entered into that certain Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of April 1, 2008 (the “Partnership Agreement”);

WHEREAS, the Partners intended that certain distributions payable to the Partners for each Partnership Unit under the Partnership Agreement be prorated for the applicable period based upon the number of days during such period that such Partnership Unit was outstanding, but the Partnership Agreement inadvertently omitted to set forth the manner in which such proration would be determined; and

WHEREAS, the General Partner has proposed this amendment of the Partnership Agreement to address such intended proration of certain distributions, and Limited Partners holding a majority of the outstanding Class A Partnership Units (or their attorney-in-fact) held by all Limited Partners have approved or consented to it pursuant to Section 14.2 of the Partnership Agreement.

NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendment to Section 5.1 of the Partnership Agreement. Section 5.1(b) of the Partnership Agreement is hereby amended and restated to read in its entirety as follows:

“(b) Second, (i) 1% to the holders of Class A Partnership Units, and (ii) 99% to the holders of Class B Partnership Units, in each case, allocated among the holders of such Partnership Units in accordance with the number of Effective Partnership Units (as defined below) held by them. “Effective Partnership Units” shall mean the weighted average number of Partnership Units outstanding during the calendar quarter that ended immediately prior to such Partnership Record Date, calculated by multiplying each Partnership Unit that was outstanding for any part of such quarter by a fraction, the numerator of which is the number of days

1

during such quarter that such Partnership Unit was outstanding, and the denominator of which is the total number of days in such quarter.”

2. Applicable Law. This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

3. Effect of Amendment. In the event of any inconsistency between the terms of the Partnership Agreement and the terms of this Amendment, the terms of this Amendment shall prevail.

4. Ratification. Except as otherwise expressly modified hereby, the Partnership Agreement shall remain in full force and effect, and all of the terms and provisions of the Partnership Agreement, as herein modified, are hereby ratified and reaffirmed.

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IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.

GENERAL PARTNER:
NHP/PMB GP LLC, a Delaware limited liability company
By:	NHP OPERATING PARTNERSHIP L.P.,
	its sole member
By:	NHP GP LLC,
	its general partner
By:	NATIONWIDE HEALTH PROPERTIES, INC.,
	its sole member
By:	/s/ Abdo H. Khoury
Name:	Abdo H. Khoury
Title:	Chief Financial & Portfolio Officer and Executive Vice President

3

EX-10.29(C)

Exhibit 10.29(c)

SECOND AMENDMENT TO THE

AMENDED AND RESTATED

AGREEMENT OF LIMITED PARTNERSHIP OF

NHP/PMB L.P.

This SECOND AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NHP/PMB L.P., dated as of February 9, 2009 (this “Amendment”), is being executed by NHP/PMB GP LLC, a Delaware limited liability company (the “General Partner”), as the general partner of NHP/PMB L.P., a Delaware limited partnership (the “Partnership”). Capitalized terms used, but not otherwise defined herein, shall have the respective meanings ascribed thereto in the Partnership Agreement (as defined below).

WHEREAS, the General Partner, the Limited Partners and Nationwide Health Properties, Inc., a Maryland corporation (for the sole purpose of agreeing to the provisions of Article XVI thereof) entered into that certain Amended and Restated Agreement of Limited Partnership of NHP/PMB L.P., dated as of April 1, 2008, as amended by the First Amendment thereto, dated as of May 12, 2008 (as so amended, the “Partnership Agreement”);

WHEREAS, the General Partner has proposed this amendment of the Partnership Agreement, and Limited Partners holding a majority of the outstanding Class A Partnership Units (or their attorney-in-fact) held by all Limited Partners have approved or consented to it pursuant to Section 14.2 of the Partnership Agreement.

NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendment to Definition of “Adjustment Factor”. Section 1.6 of the Partnership Agreement is hereby amended to read in its entirety as follows:

“Section 1.6 “Adjustment Factor” means 1.0; provided, however, that if, after the date of the Contribution Agreement: (a) NHP (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares; (ii) splits or subdivides its outstanding REIT Shares; or (iii) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a smaller number of REIT Shares, unless, in any such event, a similar transaction is effected with respect to the Partnership Units (so that the value of a Class A Partnership Unit relative to a REIT Share remains unchanged) (herein, an “Equivalent Class A Partnership Unit Value Transaction”), then the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor in effect immediately prior to such adjustment by a fraction, (1) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or

1

combination has occurred as of such time) and (2) the denominator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has not occurred as of such time); (b) NHP distributes any rights, options or warrants to all holders of its REIT Shares to subscribe for or to purchase or to otherwise acquire REIT Shares (or other securities or rights convertible into, exchangeable for or exercisable for REIT Shares) at a price per share less than the Market Value of a REIT Share on the record date for such distribution (each a “Distributed Right”), unless a similar transaction is effected with respect to the Partnership Units (in which holders of Partnership Units receive similar rights, options or warrants to subscribe for or purchase Partnership Units at a price per unit equal to the price per share for each Distributed Right multiplied by the Adjustment Factor), then the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor previously in effect by a fraction, (i) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date plus the maximum number of REIT Shares purchasable under such Distributed Rights and (ii) the denominator of which shall be the number of REIT Shares issued and outstanding on the record date plus a fraction, (1) the numerator of which is the maximum number of REIT Shares purchasable under such Distributed Rights times the minimum purchase price per REIT Share under such Distributed Rights and (2) the denominator of which is the Value of a REIT Share as of the record date; provided, however, that, if any such Distributed Rights expire or become no longer exercisable, then the Adjustment Factor shall be adjusted, effective retroactive to the date of distribution of the Distributed Rights, to reflect a reduced maximum number of REIT Shares or any change in the minimum purchase price for the purposes of the above fractions; or (c) NHP shall, by dividend or otherwise, distribute to all holders of its REIT Shares evidences of its indebtedness or assets (including securities, but excluding cash and excluding any dividend or distribution referred to in subsection (a) above), other than evidences of indebtedness or assets received by NHP, directly or indirectly, pursuant to a distribution by the Partnership, then the Adjustment Factor shall be adjusted to equal the amount determined by multiplying the Adjustment Factor in effect immediately prior to the close of business on the date fixed for determination of shareholders entitled to receive such distribution by a fraction, (i) the numerator shall be such Market Value of a REIT Share on the date fixed for such determination and (ii) the denominator shall be the Market Value of a REIT Share on the dated fixed for such determination less the then fair market value (as reasonably determined by NHP) of the portion of the evidences of indebtedness or assets so distributed applicable to one REIT Share. Any adjustments to the Adjustment Factor shall become effective immediately after the effective date of such event, retroactive to the record date, if any, for such event. By way of example of an Equivalent Class A Partnership Unit Value Transaction, and not as a limitation thereof, if NHP declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in

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REIT Shares (including a dividend in REIT Shares in which holders of outstanding REIT Shares may elect to receive all or a portion of such dividend in cash, additional REIT Shares, or a combination thereof), the Adjustment Factor shall not be adjusted if, concurrently therewith, the Partnership declares and promptly thereafter issues with respect to each Class A Partnership Unit a number of new Class A Partnership Units (or fraction thereof) equal to the product of multiplying (x) the quotient obtained by dividing (A) the aggregate number of REIT Shares paid by NHP as a dividend or distribution to holders of outstanding REIT Shares, by (B) the aggregate number of REIT Shares outstanding as of the close of business on the record date for such dividend or distribution, and (y) the Adjustment Factor in effect on such record date.”

2. Amendment to Definition of “Contribution Agreement.” Section 1.30 of the Partnership Agreement is hereby amended to read in its entirety as follows:

“Section 1.30 “Contribution Agreement” means, the Formation and Contribution Agreement and Joint Escrow Instructions, dated as of February 25, 2008, by and among NHP, as NHP, the Partnership, as Transferee, and the Persons named therein as Transferors, as it may be amended, supplemented or restated from time to time in accordance with the terms thereof.”

3. Amendment to Definition of “Preferred Return Per Unit.” Section 1.82 of the Partnership Agreement is hereby amended to read in its entirety as follows:

“Section 1.82 “Preferred Return Per Unit” means with respect to each Partnership Unit outstanding on a specified Partnership Record Date, an amount initially equal to zero, and increased cumulatively on each Partnership Record Date by an amount equal to the product of (i) the cash dividend per REIT Share declared by NHP for holders of REIT Shares on such Partnership Record Date, multiplied by (ii) the Applicable Percentage in effect on such Partnership Record Date, multiplied by (iii) the Adjustment Factor in effect on such Partnership Record Date; provided, however, that, for each Partnership Unit, the increase that shall occur in accordance with the foregoing on the first Partnership Record Date that occurs on or after the date on which such Partnership Unit was first issued shall be the foregoing product of (i), (ii) and (iii) above, multiplied by a fraction, the numerator of which shall be the number of days that such Partnership Unit was outstanding up to and including such first Partnership Record Date, and the denominator of which shall be the total number of days in the period from but excluding the immediately preceding Partnership Record Date (or, if none, the Effective Date) to and including such first Partnership Record Date; provided, further, that the Preferred Return Per Unit may be calculated differently pursuant to Section 8.6(d) if a Fundamental Event occurs. If NHP declares a dividend on its outstanding REIT Shares in which holders of REIT Shares may elect to receive all or a portion of such dividend in cash, additional REIT Shares, or a combination thereof, then, for purposes of this definition, the “cash dividend per REIT Share” shall be deemed to equal the quotient obtained by dividing (x) the aggregate amount of cash paid by NHP to holders of outstanding REIT Shares in such dividend, by

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(y) the aggregate number of REIT Shares outstanding as of the close of business on the record date for such dividend.”

4. Amendment re Issuances to the General Partner and its Affiliates. Section 4.3(c) of the Partnership Agreement is hereby amended to read in its entirety as follows:

“(c) Issuances to the General Partner and its Affiliates.

(i) Without the Consent of Class A Limited Partners, except as permitted pursuant to the provisions of Section 4.3(c)(ii) hereof, no additional Partnership Units shall be issued to the General Partner, the Operating Partnership or to an Affiliate of the General Partner, unless (x) such Partnership Units are Class B Partnership Units, and (y) the additional Partnership Units are issued for a fair economic consideration. Class B Partnership Units will be deemed to be issued for a fair economic consideration if (1) at any time within ninety (90) days prior to the issuance, the General Partner obtains a determination by an independent investment banker or financial advisor that the consideration paid or proposed to be paid by the General Partner, the Operating Partnership or its Affiliate in this regard is a fair economic consideration, or is otherwise fair from a financial point of view, to the Partnership, or (2) in connection with any Capital Contribution to the Partnership in cash, the General Partner, the Operating Partnership or its Affiliate receives, in exchange therefor, a number of Class B Partnership Units equal to the amount of such cash, divided by the Market Value of a REIT Share as of the date of such contribution.

(ii) In order to provide funds or other assets to the Partnership in connection with or relating to any closing under the Contribution Agreement or the Pipeline Agreement, or to otherwise make any payments required to be made by the Partnership pursuant to the Contribution Agreement or the Pipeline Agreement, the General Partner, the Operating Partnership or any Affiliate of the General Partner may make a Capital Contribution to the Partnership in cash, or, to the extent expressly provided for under the Contribution Agreement or the Pipeline Agreement, in the form of cash equivalents or Contributed Property, and shall receive, in exchange therefor, a number of Class B Partnership Units equal to (A) the amount of such cash, (B) the value of such cash equivalents, or (C) the Agreed Value of any Contributed Property, in any such case, divided by the Market Value of a REIT Share as of the applicable Valuation Date; provided, however, that with respect to any cash Capital Contribution under the Contribution Agreement relating to any closing under the Contribution Agreement occurring prior to December 31, 2008, (i) if the Market Value of a REIT Share as of such closing date is less than the quotient obtained by dividing (x) Twenty-Nine Dollars ($29.00), by (y) the Adjustment Factor in effect as of such closing date, then the number of Class B Partnership Units shall be determined by dividing such cash amount by such quotient, and (ii) if the Market Value of a REIT Share as of such closing date is more than the quotient obtained by dividing (x) Thirty-Three Dollars ($33.00),

4

by (y) the Adjustment Factor in effect as of such closing date, then the number of Class B Partnership Units shall be determined by dividing such cash amount by such quotient. For any Capital Contribution by the General Partner, the Operating Partnership or any Affiliate of the General Partner pursuant to this Section 4.3(c)(ii), the Valuation Date shall be (1) if such Capital Contribution is in connection with or relates to a closing under the Contribution Agreement or the Pipeline Agreement (whether such Capital Contribution is made before, upon or after such closing), the date of such closing, or (2) otherwise, such other date as is specified in the Contribution Agreement or the Pipeline Agreement.”

5. Amendment re Calculation of Distributions. A new Section 5.6 is hereby added to the Partnership Agreement, immediately after Section 5.5, which shall read in its entirety as follows:

“Section 5.6 Calculation of Distributions

In calculating all distributions payable to any holders of Partnership Units, the General Partner shall round the amount per unit to the nearest whole cent ($0.01), with one-half cent rounded upward.”

6. Amendment re Redemption Rights. A new Section 8.6(f) is hereby added to the Partnership Agreement, immediately after Section 8.6(e), which shall read in its entirety as follows:

“(f) If, in connection with an Equivalent Class A Partnership Unit Value Transaction (as set forth in the definition of “Adjustment Factor”), the Partnership declares and issues to each Limited Partner with respect to each Class A Partnership Unit then held by such Limited Partner (each such Class A Partnership Unit, an “Existing Class A Partnership Unit”) a number of new Class A Partnership Units (or fraction thereof) in lieu of any adjustment to such Adjustment Factor as provided herein (each such new Class A Partnership Unit (or fraction thereof), an “Additional Class A Partnership Unit”), such Limited Partner or its Assignee may exercise its Redemption Right pursuant Section 8.6(a) hereof with respect to any Additional Class A Partnership Unit at anytime after the date on which such Limited Partner is first entitled to exercise its Redemption Right with respect to the applicable Existing Class A Partnership Unit as to which such Additional Class A Partnership Unit was issued. Any REIT Shares issued in exchange for Additional Class A Partnership Units in a Redemption shall be registered under the Securities Act of 1933, as amended, pursuant to the Registration Rights Agreement.”

7. Applicable Law. This Amendment shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.

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8. Effect of Amendment. In the event of any inconsistency between the terms of the Partnership Agreement and the terms of this Amendment, the terms of this Amendment shall prevail.

9. Ratification. Except as otherwise expressly modified hereby, the Partnership Agreement shall remain in full force and effect, and all of the terms and provisions of the Partnership Agreement, as herein modified, are hereby ratified and reaffirmed.

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6

IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above.

GENERAL PARTNER:
NHP/PMB GP LLC, a Delaware limited liability company
By:	NHP OPERATING PARTNERSHIP L.P.,
	its sole member
By:	NHP GP LLC,
	its general partner
By:	NATIONWIDE HEALTH PROPERTIES, INC.,
	its sole member
By:	/s/ Abdo H. Khoury
Name:	Abdo H. Khoury
Title:	Chief Financial & Portfolio Officer and Executive Vice President

7

EX-12

EXHIBIT 12

Ratio of Earnings to Fixed Charges

	2008		2007		2006		2005		2004
Ratio of earnings to fixed charges:
Ratio		2.07		2.36		1.62		1.53		1.61
Income from continuing operations	$	108,140	$	132,633	$	52,634	$	33,438	$	32,823
Interest		101,045		97,639		85,541		62,625		53,270
“Earnings”	$	209,185	$	230,272	$	138,175	$	96,063	$	86,093
Interest	$	101,045	$	97,639	$	85,541	$	62,625	$	53,270
Capitalized interest		—		—		—		—		365
“Fixed charges”	$	101,045	$	97,639	$	85,541	$	62,625	$	53,635
Ratio of earnings to combined fixed charges and preferred stock dividends:
Ratio		1.92		2.07		1.37		1.23		1.32
Income from continuing operations	$	108,140	$	132,633	$	52,634	$	33,438	$	32,823
Interest		101,045		97,639		85,541		62,625		53,270
“Earnings”	$	209,185	$	230,272	$	138,175	$	96,063	$	86,093
Interest	$	101,045	$	97,639	$	85,541	$	62,625	$	53,270
Capitalized interest		—		—		—		—		365
Preferred dividends		7,637		13,434		15,163		15,622		11,802
“Combined fixed charges and preferred stock dividends”	$	108,682	$	111,073	$	100,704	$	78,247	$	65,437

EX-21

EXHIBIT 21

Subsidiaries of the Company

As of December 31, 2008

Name	State of Incorporation or Organization
BIP Sub I, Inc.	Delaware
JER/NHP Senior Living Acquisition, LLC	Delaware
MLD Delaware Trust	Delaware
MLD Financial Capital Corporation	Delaware
MLD Properties Limited Partnership	Delaware
MLD Properties, Inc.	Delaware
MLD Properties, LLC	Delaware
Nationwide Health Properties Finance Corporation	Delaware
NH Texas Properties Limited Partnership	Texas
NHP Carillon, LLC	Delaware
NHP CM Investment, Inc.	Delaware
NHP Joliet, Inc.	Illinois
NHP Properties Business Trust	Massachusetts
NHP Senior Housing, Inc.	California
NHP/Broe, LLC	Delaware
NHP/Mc Shane SAMC, LLC	Delaware
NHP/PMB Limited Partnership	Delaware
NHP Senior Indiana, LLC	Delaware
PMB/NHP Vancouver Partners, LLC	Delaware
QR Lubbock Texas Properties	Texas

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements and related prospectuses:

(1) Registration Statement (Form S-3 No. 333-142643) of Nationwide Health Properties, Inc.,

(2) Registration Statement (Form S-3 No. 333-106730) of Nationwide Health Properties, Inc.,

(3) Registration Statement (Form S-8 No. 333-125908) pertaining to the securities to be offered under the performance incentive plan of Nationwide Health Properties, Inc., and

(4) Registration Statement (Form S-8 No. 333-20589) pertaining to the securities to be offered under the stock option plan of Nationwide Health Properties, Inc.,

of our report dated February 16, 2009, with respect to the consolidated financial statements and schedule of Nationwide Health Properties, Inc. and our report dated February 16, 2009, with respect to the effectiveness of internal control over financial reporting of Nationwide Health Properties, Inc., included in this Annual Report (Form 10-K) of Nationwide Health Properties, Inc. for the year ended December 31, 2008.

/s/ ERNST & YOUNG LLP

Irvine, California

February 16, 2009

EX-31

Exhibit 31

CERTIFICATIONS

I, Douglas M. Pasquale, certify that:

1. I have reviewed this report on Form 10-K of Nationwide Health Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	February 18, 2009	/s/ DOUGLAS M. PASQUALE
		Douglas M. Pasquale
		President and Chief Executive Officer

I, Abdo H. Khoury, certify that:

1. I have reviewed this report on Form 10-K of Nationwide Health Properties, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	February 18, 2009	/s/ ABDO H. KHOURY
		Abdo H. Khoury
		Executive Vice President and Chief Financial and Portfolio Officer

EX-32

Exhibit 32

WRITTEN STATEMENT

PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned, Douglas M. Pasquale, the Chief Executive Officer, and Abdo H. Khoury, the Chief Financial and Portfolio Officer, of Nationwide Health Properties, Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certify that, to the best of my knowledge:

(i) the Annual Report on Form 10-K for the annual period ended December 31, 2008 of the Company (the “Report”) fully complies with the requirements of section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: February 18, 2009

/s/ DOUGLAS M. PASQUALE

Douglas M. Pasquale

President and Chief Executive Officer

/s/ ABDO H. KHOURY

Abdo H. Khoury

Executive Vice President and Chief Financial and Portfolio Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, regardless of any general incorporation language in such filing.