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Exhibit 10.27
NHP
NATIONWIDE HEALTH PROPERTIES, INC.
February 24, 1997
Via Telecopy and Overnight Delivery
H. ▇▇▇▇ ▇▇▇▇▇▇▇▇
American Retirement Communities, L.P.
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▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇:
The purpose of this letter is to outline the terms under which Nationwide
Health Properties, Inc. ("Nationwide") would provide to American Retirement
Corporation ("ARC") lease financing for the acquisition of existing long-term
care facilities ("Acquisition Properties") and the de novo development of long
term care facilities ("Development Properties"). Based on the information
available to us and subject to the conditions precedent contained in this
letter, Nationwide is prepared to provide such financing under the following
salient terms.
TENANT(S) - American Retirement Corporation, its controlled subsidiaries, or
other party acceptable to Nationwide.
GUARANTIES AND CROSS-DEFAULTS - Guarantee of ARC, cross-guaranties and
cross-defaults between and among ARC leased properties financed by Nationwide.
FACILITY AMOUNT - Approximately $110,000,000.
DEVELOPMENT FUNDING - Actual direct and indirect costs which are incurred for
the Development Properties and which are paid to unrelated parties for: land;
easements; entitlements; fees including impact fees; permits; utility hook-ups;
site preparation; landscaping; construction; fixtures; equipment; design;
architectural and engineering services and inspections; construction period
rent; insurance, taxes; and utilities; as-built survey; reasonable legal and
accounting fees; reasonable Tenant(s) or Guarantor(s) overhead and
out-of-pockets.
DEVELOPER - ARC will plan, design, develop, build, obtain licences for, and
open the Development Properties 1) for a maximum amount agreed to in advance
for each Development Property and 2) complete each Development Property by a
date certain agreed to in advance.
TERM - Initial lease term to expire 10 years from closing the Transaction;
renewals of all, but not fewer than all, the Properties for 4 terms of 10 years
each at the option of ARC.
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February 24, 1997
Page 2
TRANSACTION COSTS - Nationwide and ARC will each pay their respective ancillary
transaction costs. Nationwide will pay for environmental, survey, title
insurance, site inspections, and its own legal costs up to a reasonable level
agreed to in advance for each Property.
OTHER FEES - None.
MINIMUM RENT - 320 basis points for Acquisition Properties, 340 basis points
for Development Properties after completion, both over the 20 trading day
average 10-year Treasury rate; for Development Properties prior to completion,
30-day Libor plus 150 basis points.
ADDITIONAL RENT - Beginning in Year 2, Additional Rent will equal 10% of
increases in revenue over revenue in the first year but not less than 0% and
not to exceed 2.5% annual increases.
RENEWAL RENT - Fair market value as of renewal date (but not more than
Nationwide's investment increased by 2.5% per year) times the then 10-year
Treasury rate (20 day average) plus 300 basis points; total rent may not
decrease from the prior year, nor may total rent increase by more than 25% from
the prior year.
SECURITY DEPOSIT - Equal to 6 months Minimum Rent for the first $40,000,000 of
Facility usage; 3 months for the next $30,000,000, none thereafter, in cash or
letter of credit from mutually acceptable bank. Nationwide will pay interest on
cash, if any, held as a Security Deposit, at a rate equal to income earned
thereon.
MAINTENANCE AND UPKEEP EXPENDITURES - Tenant will, by a mutually agreeable
mechanism, fund expenditures to insure that the Properties remains in high
quality and competitive position.
TENANT'S OPTION - ARC will have the option to purchase all, but not fewer than
all, the Properties at the end of the initial lease term and all renewal terms
for fair market value but not less than Nationwide's investment.
CONDITIONS PRECEDENT - Satisfaction and fulfillment of conditions precedent
customary and appropriate for transactions of this type, including but not
limited to:
Inspection and approval of each Acquisition Property and the site for each
Development Property by Nationwide;
Approval of each Property and each transaction by Nationwide's board of
directors.
Prior approval by Nationwide of Development Property plans, specifications,
material contracts, schedules, and budgets.
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February 24, 1997
Page 3
Receipt and approval by Nationwide of most recent Medicaid, Medicare, and/or
regulatory inspection reports, as well as financial statements and operating
reports on each Acquisition Property and Guarantor(s).
Satisfaction of Nationwide with the material terms and conditions of all
necessary documents including, but not limited to, supporting documentation
such as guaranties, trust agreement(s), partnership agreement(s), corporate
charter(s), bylaws, resolutions, certificates, and security documents in
addition to purchase agreement(s), development agreement(s), and lease(s), and
the execution, delivery and, where applicable, public recordation, of all
necessary documents.
No material adverse change from the date of due diligence to closing.
Accuracy of representations and warranties and absence of default or other
material breach.
Satisfaction of Nationwide with the final organization of and structure of each
transaction, Developer, Tenant(s), Guarantor(s), and title to respective
assets.
Receipt and approval by Nationwide of evidence satisfactory to Nationwide as to
the due formation, power and authority of Developer, Tenant(s), Guarantor(s),
and other parties to each transaction to participate in each transaction; the
enforceability of all documents and agreements; and the absence of material
actions, suits, judgments, or proceedings.
Repayment of outstanding liens, encumbrances and debt on each Property and
satisfaction of Nationwide with unencumbered title thereon. Such title to be
insured by ALTA 1970 Form B extended coverage in amount equal to Nationwide's
investment. Nationwide to receive surveys on each Property.
Receipt and approval by Nationwide of satisfactory evidence that each
Acquisition Property has passed all inspections and has received all licenses,
permits, access approvals, certificates of need, provider agreements, Medicare,
Medicaid and third party payor agreements and other authorizations and
approvals as are needed for the operation of each Property as a
skilled/intermediate nursing facility, assisted/independent living facility,
personal care facility, continuing care retirement community, or adult
congregate living facility as the case may be.
Receipt and approval by Nationwide of satisfactory Phase 1 Environmental
Assessment Reports (or appropriate updates) prepared by qualified experts
approved by Nationwide showing no presence or potential of hazardous materials
in, on, under or around each Property.
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February 24, 1997
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Receipt by Nationwide of satisfactory certificates of compliance with respect
to material obligations of Developer, Tenant(s) and Guarantor(s) as are
customary with transactions of this nature.
Receipt and approval by Nationwide of certificates of insurance satisfactory to
Nationwide naming Nationwide as additionally insured.
Receipt by Nationwide of representations and warranties customary and
appropriate for transactions of this nature.
This letter is not a commitment. Such a commitment can only be granted by
Nationnwide's board of directors, which has not considered any Property or any
transaction contemplated herein. We look forward to working with you in the
future.
Sincerely,
T. ▇▇▇▇▇▇ ▇▇▇▇▇▇
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T. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Senior Vice President
TAS:pb f:\users\andy\ARC\acqdevpr\terms2
AGREED AND ACCEPTED:
H ▇▇▇▇ ▇▇▇▇▇▇▇▇ 2/26/97
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Signature Date
Name (printed): H ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: EVP Corporate Development
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Company: American Retirement Communities, L.P.
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